Bond yields will keep rising to 2 per cent and possibly higher this year, Macquarie Securities forecasts.

In its latest equity strategy update, Macquarie said investors should factor in the impact of long bond yields of 2 per cent by the end of the year and US 10-year bond rates as high as 2.4 per cent.

The US 10-year Treasury yield has climbed from a low of around 55 basis points in August last year to its current level of 1.6 per cent.

Over the same period, the Australian government 10-year bond yield has risen from around 90 bps to a peak of 1.9 per cent at the beginning of March, before settling back to around 1.7 per cent now.

Macquarie said: “The house view is that yields rise to 2 per cent by the end of calendar 2021, and we think there is upside risk to this estimate. The US 10-year yield could be closer to 2.4 per cent.

“Upward pressure should remain, given US stimulus and vaccines.

“While rates have gone up, they are only back to levels that prevailed at the onset of COVID-19. In other words, the fastest ever collapse in rates in the early part of 2020 has now been replaced by an equally rapid retracement mirroring expectations of global recovery.”

Macquarie says rising yields are good news for financials. It has added QBE, IAG and Janus Henderson Group to its model equity portfolio and increased exposure to Westpac, ANZ and Suncorp.

Macquarie expects that the “reflationary and inflationary” spike will peaks in mid 2022, by which time “fiscal policies become more of a headwind”.