LONDON (Reuters) - UBS on Wednesday slashed its forecasts for world growth and government bond yields on Wednesday, predicting 10-year U.S. Treasury yields — the benchmark for global borrowing costs — would end the year at just 1%.
A bitter global trade war that has hurt world economic growth and fueled expectations for rate cuts from major central banks has sparked a sharp fall in bond yields this year.
In a note, UBS said it now sees world growth dropping to 2.5% in the coming quarters compared to an annualized 3.2% previously, and cut its U.S. 10-year Treasury yields forecasts by 25 basis points to 1% for 2019 and 1.25% for 2020.
The 10-year Treasury yield was trading at 1.48% on Wednesday US10YT=RR.
UBS said it had also revised down its German 10-year Bund yield forecast by 55 bps to -75 bps for year-end 2019 and down 60 bps to -50 bps by the end of 2020 DE10YT=RR. Bund yields are currently trading at around -0.68%.
It also cut its forecasts for Australian, New Zealand and British bond yields.
UBS now sees 10-year British gilt yields, now trading at 0.45% GB10YT=RR, falling to 0.25% by year-end and trading at 0.75% by the end of 2020, from previous forecasts of 1.00% and 1.30% respectively.
Reporting by Dhara Ranasinghe; editing by Marc Jones