Citigroup: Interest rates of 4-4.5% on ten-year US bonds are possible

For global financial markets the situation sounds like a return to normal. The sale of US government bonds, which triggered an increase in interest rates to levels unseen in many years, points to "normalization" on the market, according to Citigroup.
The bearish breakthrough in the world's largest bond market is an underestimated risk, according to Mark Schofield and Ben Nabaro, from the US investment bank. A similar phenomenon in bond markets has not been since the financial crisis, experts recall.
Recent comments suggest that investors are more attached to the scenario where rising interest rates and a strong dollar hinder recovery and lead to a reduction in interest rates rather than a scenario in which interest returns at pre-crisis levels.
These comments come true in an environment of return to global debt markets, with interest rates on 10-year bonds rising above 3.05 percent, a very high level of resistance.
The bulls, with regard to US bond investors, point to the rise in oil prices and overestimated market expectations as the main reasons for interest rate rises above the psychological limit of 3%.
The positive performance of the US economy as well as inflation would justify a premium between long-term and short-term bonds, which means we can see an increase in interest rates on 10-year bonds to 4-4.5%, according to Citi.
Even if they do not reach such levels, raising interest rates on 10-year bonds can in itself create a self-stabilizing mechanism. It is for this reason that many traders believe that interest on this kind of US bonds will decrease rather than continue to rise.
Interest rates of 4.5% are not Citi's base scenario. This is a hypothetical scenario. However, this scenario should not be so overlooked by the market and seems to be underestimated, the bank said.