Morgan StanleyTreasury yields may have risen too much in the near term, as global demand for "risk-free" assets remains strong, according to Michael Kushma of investment management.

"everyone is worried that the Fed will reduce its size, but the US fiscal deficit should shrink sharply next year," Kushma, the company's chief global fixed income investment officer, said on Tuesday. "at the moment, I don't see a supply problem with US Treasuries. Us Treasuries are risk-free assets around the world. That won't change. Us bond yields are high relative to the rest of the world, which means the US is a high-yield alternative. "

The yield on the benchmark 10-year treasury note hovered around 1.61% on Tuesday. It reached 1.63% last week, the highest level since the middle of the year.

Global markets are weighing the accelerating rise in inflation, which tests the Fed's determination not to raise interest rates until further progress is made in the labour market recovery. Bank of America CorporationA monthly survey of fund managers conducted in the week ended October 14 showed that bond allocation fell to a record low as fears of inflation boosted expectations of higher interest rates.

In Kushma's view, most countries may have "overexpected" the rate of rise in interest rates.

"the cyclical rebound in the recovery next year will be strong. From a credit point of view, we will be fine, "Kushma pointed out." "the labour market will remain strong and inflationary pressures will be strong in the near future," but "there is no doubt that inflation will slow over the next 12 months."