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A lot of large firms are predicting that the 10 year treasury yield is going to rise. My question is that if such prediction has any substance, shouldn't the current 10 year yield rise accordingly, as people anticipate the higher rates? Shouldn't the current 10 year yield the best prediction of its future value?

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Loosely speaking, we use forward yields, not spot yields, to identify the market's estimate of yields in the future. Right now, the forward yields are higher than the spot yields, because the yield curve is upward sloping. So the market is not necessarily inconsistent with the analysts' predictions.

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  • $\begingroup$ that is for sure one effect. Now let's look at the forward rate. Do you think the current forward is the best forecast of future forward rate of the same time period? $\endgroup$ – Tom Bennett Mar 4 '17 at 17:48
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    $\begingroup$ There is a lot of literature devoted to whether forward rates are a good estimator of future interest rates. Many authors think that the slope of the curve is partly due to expectations of rate movements, and partly due to risk premium of longer bonds. The question seems far from settled. My feeling is that forward rates are better than spot rates as a predictor, in the current environment at least. $\endgroup$ – dm63 Mar 4 '17 at 23:18

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