With the Fed buying a good portion of the new issuance, there is simply not a lot of new supply for the market to absorb, and investors are still hungry for yield.
The bottom line is, while I expect rates to continue to rise, I would stick with a year-end target of 2.25-2.50% for the 10 year Treasury note. But the backup in yield is likely to be a slow affair, with a lot of backing and filling.
In short, I still believe that with duration or rate sensitivity at historic highs, investors should avoid the long-end of the Treasury curve and instead accept marginally more credit risk, with a focus on high yield, bank loans, and emerging market debt.
Russ Koesterich, CFA, is the iShares Global Chief Investment Strategist.