Iran Shock ‘Long-Term Bullish’ for Treasuries, BMO’s Lyngen Says
Summary
- Ian Lyngen's base case is for lower US rates, making him long-term bullish on Treasuries.
- He forecasts the 10-year Treasury yield to fall below 4% by year-end.
- He expects the 2-year sector to "continue to struggle," implying underperformance.
- He believes 10- and 30-year Treasuries should outperform due to expected compression in breakevens and lower nominal rates if the Fed delays cuts.
- The Middle East conflict introduces significant uncertainty; a prolonged crisis could push oil to $125-$130/barrel.
- Higher energy prices may strain consumers, undermining the strong US growth narrative over the next several quarters.
- He cautions against trying to front-run the market due to this high uncertainty.
- He observes rapid yield curve compression, with markets anticipating lower front-end yields, especially in Europe.
- A flatter yield curve is seen as appropriate in the current environment.
Trade Ideas
Speaker said, "I think ten and 30 years should outperform" and specifically that "ten year yields are below 4% by the end of the year." If the Fed delays rate cuts to continue fighting inflation, inflation expectations (breakevens) should compress, pulling nominal rates lower. This dynamic particularly benefits long-dated bonds. LONG because he expects yields on these maturities to fall, raising their prices, with a specific target for the 10-year. Persistent inflation forces the Fed to hike further or hold rates high for longer, causing long-term yields to rise instead.
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This Bloomberg Markets video, published March 19, 2026, features Ian Lyngen discussing TLT. 1 trade idea extracted by AI with direction and confidence scoring.
Speakers: Ian Lyngen · Tickers: TLT