New York: The bond-market rout is coming to an end, judging by forecasts from two of the biggest investors.

US 10-year yields will have trouble climbing too far past 2 per cent from 1.81 per cent, according to Jim Caron at Morgan Stanley Investment Management, which oversees $406 billion. At Fidelity Investments, with $2.1 trillion, strategist Tom DeMarco in the company’s trading arm, said in October he wouldn’t be surprised to see 2.1 per cent, though yields may fall in January.

“Nobody really believes that rates can just rise very very quickly, or that bond prices can fall off a cliff,” Caron, who is based in New York, said Tuesday on Bloomberg Television. “You’re not seeing the growth. You’re not really seeing the inflation.” Morgan Stanley, the company’s parent, is one of the 23 primary dealers that underwrite US debt.

The bulls are taking an interest as yields climb to the highest level since May. South Korea’s Government Employees Pension Service said it plans to buy at 2 per cent. An investor at Asset Management One Co. in Tokyo said Tuesday he’s sticking with US long-term debt as consumer prices stay in check. Traders are betting the Federal Reserve will refrain from raising interest rates at the end of a meeting Wednesday and act in December, futures contracts indicate.

Treasuries rose Wednesday, pushing the 10-year yield down two basis points as of 7:10am in London. The price of the 1.5 per cent security due in August 2026 advanced 1/8, or $1.25 per $1,000 face amount, to 97 6/32, based on Bloomberg Bond Trader data. The yield rose to 1.88 per cent Tuesday, extending its push to the highest levels since May 31.

Treasury Holdings

Fund managers boosted Treasury holdings to 24.5 per cent of assets last week, matching the most since March, according to a weekly survey of portfolio investors conducted by Stone & McCarthy Research Associates, a fixed-income research firm in Princeton, New Jersey.

US 10-year yields will fall to 1.73 per cent by Dec. 31 and then climb to 2.11 per cent by the end of 2017, based on a Bloomberg survey of economists, with the most recent forecasts given the heaviest weightings. “Should GDP growth in the fourth quarter come in below 2 per cent, we may see bond rates fall in January as markets reassess the pace of rate hikes,” DeMarco wrote on the Fidelity website last month. “There are still some structural issues holding down yields, from ageing populations in developed markets to relatively high global debt levels.” Fidelity is the largest holder of US debt after the Fed and Vanguard Group Inc.

For Asset Management One, overseeing about $482 billion, the inflation rate is reason to stick with Treasuries, Yusuke Ito, a money manager at the firm, said Tuesday. A gauge of US consumer prices monitored by the Fed rose 1.2 per cent in September from a year earlier, a report showed this week, short of the central bank’s 2 per cent target.

It’s almost time to start stocking up on US debt for Kim Young-sung, the head of overseas investment in Seoul at South Korea’s Government Employees Pension Service, which has $13 billion in assets. “If it goes above 2 per cent, I’m going to start buying Treasury bonds,” he said. “If it goes further, then I will buy more.”