A combination of U.S. fiscal expansion, potential tax cuts, and a healthy economy is likely to push Treasury yields higher, with T. Rowe Price projecting yields could even reach 6%.

In its latest note, the investment manager suggests that a 5% 10-year Treasury yield could be reached as early as the first quarter of 2025, after which a move toward 6% is possible.

"Is a 6% 10‑year Treasury yield possible? Why not? But we can consider that when we move through 5%," wrote Arif Husain, T. Rowe Price’s Head of Fixed Income, in the note.

The 10-year Treasury yield, which last touched 6% in 2000, stood at about 4.4% on Tuesday.

Husain also suggested that the current transition period in the U.S. politics is an opportunity to position for rising longer‑term Treasury yields and a steeper yield curve. Between the U.S. election and

the presidential inauguration, markets are now in a “calm before the storm.” 

He further noted that the decreasing foreign demand for U.S. Treasuries could add upward pressure on yields, and potential tariffs and immigration policies would likely be inflationary.

The Fed appears to have guided the economy into an elusive soft landing with little chance of a recession on the horizon, especially if the expected post election pent‑up demand scenario plays out, he added. 

The Fed is set to announce its rate decision on Wednesday, with a widely expected 25 basis point cut to 4.25%-4.5% at its final policy meeting of the year.