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By Hari Kishan

BENGALURU, Feb 24 (Reuters) — Bond strategists have boosted their U.S.benchmark Treasury yield forecasts only a month after taking an axe to them, as the chances of an interest rate cut from the Federal Reserve this year have faded, a Reuters poll showed.

Bond market trading often gets reflected in subsequent yield forecasts, but such abrupt changes of direction in just a couple of months in a survey that tends to capture incremental change underscores the potential for volatility this year.

It also shows how concerned market strategists have become about the likelihood the decline in U.S.inflation — it has dropped sharply from multi-decade peaks last year — may stall at a level well above the Fed’s 2% target.

Until recently bond markets have been tilting against consistent Fed guidance since late last year that policymakers are not minded to cut the fed funds rate swiftly once they reach the terminal rate — and that is still months away.

So while the poll showed U.S.Treasury yields dipping from their current highs many of them said there were upward risks to that outlook.

What many market strategists have underestimated so far this year is the strength of the U.S. economy as well as broader global output, which is likely to ensure central banks remain in tightening mode for url shortener longer than many had thought.

«Short- and long-term, the markets are adjusting to this notion, which frankly I’ve suspected for a long time, that there were not going to be many recessions around the world,» said Robert Tipp, chief investment strategist and head of global bonds at PGIM Fixed Income.

«There’s also some risk to some of the drop off seen in some local inflation measures — some signs we may have another bounce upward in inflation, or it’s going to stabilize at a level that’s a bit high for the central banks.»

Benchmark 10-year Treasury notes in the Feb.16-23 poll of 40 fixed income strategists were forecast to yield 3.71%, 3.66% and 3.40% in the next three, six and 12 months, up from 3.70%, 3.60% and 3.25%.

U.S. two-year yields, the most sensitive to the Fed’s rate expectations, were forecast to drop from around 4.71% presently to 3.69% in a year.That compares with 3.52% in last month’s poll.

All median forecasts were upgraded from last month’s survey.

A near 60% majority of analysts, 10 of 17, who answered an additional question said the likelihood of the U.S.10-year Treasury yield revisiting last year’s peak over the coming three months was high. The remaining seven said low.

«We think that the current levels at the long end of the curve are attractive. The extent of monetary-policy tightening priced into forwards is broadly in line with our forecasts, and while inflation might remain volatile in the short term, the disinflationary trend will accelerate, in our view, in the coming months,» noted Elia Lattuga, cross asset strategist and deputy head of strategy research at UniCredit.

«That said, monetary impulses are still a source of headwinds to risk appetite. The effects of tightening delivered so far might be felt after a delay and trigger bouts of volatility.» (Reporting by Hari Kishan; Polling by Mumal Rathore and Indradip Ghosh; Editing by Ross Finley, William Maclean)