Société Générale: The Federal Reserve will continue to cut interest rates, leading to a decline in short-term rates, while tariffs and fiscal deficits push up long-term rates

Société Générale predicts that by the end of 2025, the yield on 10-year U.S. Treasury bonds will rise to 4.5%, while the yield on 2-year U.S. Treasury bonds will fall to 3.5%. The reason is that the Federal Reserve will continue to cut interest rates, which will lower short-term rates, but will also stimulate the economy and increase the fiscal deficit, leading to increased demand for long-term government bonds and causing long-term yields to rise. Additionally, Trump's tariff plan may raise inflation expectations, and the U.S. government is expected to increase the issuance of government bonds to address the fiscal deficit, both of which will push up yields