Mohamed El-Erian Warns US Treasury Yields Poised To Hover Near 5% Through 2025, Maps Out Survival Strategy

U.S. Treasury yields continued their upward march as prominent economist Mohamed El-Erian predicts yields could remain elevated through 2025, highlighting persistent inflation concerns and shifting market dynamics.

What Happened: The 20-year Treasury yield reached 4.96%, while the 10-year Treasury yield was 4.66% on Wednesday, reflecting broader moves across fixed-income markets.

El-Erian, Chief Economic Advisor at Allianz, suggested on the social media platform X that the 10-year Treasury yield could “spend quite a bit of 2025 in the 4.75-5% range,” despite consistent inflows into fixed income from both domestic and international investors.

Although significantly higher yields are a common theme across advanced economies, there have been notable country-specific trends.
Take the UK, for example.
The increase in yields there has matched the US, leading to a slightly higher overall level for its 10-year Gilt.
However,… pic.twitter.com/vCio1LkKAk
— Mohamed A. El-Erian (@elerianm) January 8, 2025

The yield trajectory comes amid uncertainty about the Federal Reserve’s rate path, particularly as markets digest potential policy shifts under the incoming administration. Recent Fed minutes revealed officials used variations of the word “uncertain” twelve times, according to Jeffrey Roach, chief economist at LPL Financial.

Speaking on CNBC, El-Erian downplayed concerns about inflation readings being “hotter than expected,” arguing that current inflation targets may be outdated. This perspective aligns with some Fed officials’ views that economic strength may not necessarily fuel inflationary pressures.

Larry Tentarelli, chief technical strategist at Blue Chip Daily Trend Report, expects the Federal Reserve to maintain current rates through early 2025. “Investors should expect no rate cuts in Q1 2025 and 10-year US Treasury yields in the 4.50 to 5.00% range,” he noted.

Why It Matters: Markets showed mixed reactions to these developments. The SPDR S&P 500 ETF Trust SPY and the Invesco QQQ Trust QQQ closed slightly lower, while the Dow Jones Industrial Average managed a modest 0.25% gain.

The yield environment suggests investors may need to adapt their strategies. El-Erian advocates for “bar-belled investment portfolios” and bottom-up, name-driven investing rather than broad market or thematic approaches in the volatile year ahead.

Extending what already has been quite a move in the last thirty days, the yield on the 10-year US government bond is trading this morning above 4.70% on the back of issues relating to inflation, growth, and new issuance.
Note that this move is notwithstanding many months of solid… pic.twitter.com/j9jZLxFT2V
— Mohamed A. El-Erian (@elerianm) January 8, 2025