<p> The US 10-year yield is at 3.12%, its highest level since September 2011. The next critical juncture is the upcoming Fed meeting next month. Assuming 10-year yields maintains its upward climb this year, it could reach 3.29% by the Fed meeting in June.</p><p></p><p> Should the Fed signal more rate hikes, the US 10-year yield could even hit the 4% level this year.</p><p></p><p> </p><p></p><p><b><span style="text-decoration: underline;">Prepare for 4% yield</span></b></p><p></p><p> In a recent speech early this month, JP Morgan CEO Jamie Dimon stated that investors should be prepared for benchmark yields to climb to 4%. The US Fed could be prompted to raise interest rates faster than anticipated should US growth and inflation move fast enough.</p><p></p><p> </p><p></p><p><b><span style="text-decoration: underline;">June Fed meeting</span></b></p><p></p><p>The US Fed Fund Futures are pricing in a 100% probability of a rate hike at the coming June Fed meeting, with the rate at 1.75% - 2.00%. Thus, we expect the US rates to continue its upward climb as we approach the Fed meeting in June.  </p><p></p><p> </p><p></p><p><b><span style="text-decoration: underline;">Yield could hit 3.29% by the Fed meeting in June</span></b></p><p></p><p>Since the start of the year, the 10-year yield is rising at 0.713 bps per day. Assuming this rate of increase, the 10-year yield could reach 3.29% by June Fed meeting (26 days away).</p><p></p><p> </p><p></p><p>At 3.29% level, this will exceed the 2011 July high of 3.221%. We highlight the other key levels above this level:</p><p></p><p>i) 3.766% - 2011 high</p><p></p><p>ii) 4.0095% - 2010 high</p><p></p><p>iii) 4.2744% - 2008 high</p><p></p><p> </p><p></p><p>The 4% yield is the next Maginot line to watch. A hawkish Fed meeting in June could pave the way for yields to reach 4% this year.</p><p></p><p> </p><p><span style="font-family: Calibri; font-size: medium;" size="3" face="Calibri"><b>Edmund Chan, CFA</b></span></p>