Wall Street's major banks predict that US bond yields will decline next year. The composition of the Federal Reserve's interest rate setting committee is about to change, and the policy stance is expected to become more polarized between dovish and hawkish.

Wall Street follows the guidance of the Federal Reserve, and major institutions predict a decline in US Treasury yields next year.

Wall Street listens to the information from the Federal Reserve. They predict that even if Trump's trade and tax policies pose risks to the bond market, short-term US Treasury yields will still decline by 2025.

The forecasts from strategists are largely consistent, indicating that the yields on 2-year Treasury bonds, which are more sensitive to Federal Reserve interest rate policies, will decrease. They also expect that the yields will decline by at least 0.5 percentage points from current levels in 12 months.

David Kelly and others from the Morgan Asset Management team stated: "Although investors may be shortsightedly focused on the speed and magnitude of rate cuts next year, they should also take a step back and think about the fact that the Federal Reserve is still on a rate-cutting trajectory in 2025."

The new lineup of FOMC voting members for the Federal Reserve in the new year indicates that policy stances are likely to become more polarized between dovish and hawkish.

The composition of the Federal Reserve's interest rate-setting committee is about to change, and at the same time, renewed inflation concerns are making central bank decision-making more complicated.

I believe this sends a rather strong signal that a rate cut is unlikely in January, said Goldman Sachs Chief Economist Jan Hatzius. Besides that, the data is the real driving factor.

It is expected that by 2025, there will be more divisions within the FOMC. "We assess the voting members of the committee along the hawk-dove spectrum and find that the opinions of next year's FOMC voting members will diverge more, with views spread across both ends of the spectrum and less concentrated in the middle."