LONDON, Aug 28 (Reuters) - The U.S. 10-year Treasury

yield is likely to rise back above 4% in the coming weeks,

Deutsche Bank has said, with markets currently over-confident

about the amount of rate cuts the Federal Reserve will deliver.

A slowdown in inflation and signs of labour market weakness

have caused investors to price in around 100 basis points of

interest rate cuts from the Fed this year.

That has helped the 10-year Treasury yield, which sets the

tone for borrowing costs around the world, fall almost 40 basis

points over the last month to 3.8%

A move to around 4.1% in the coming weeks was likely, the

bank reckons.

Deutsche Bank's global head of rates research Francis Yared

recommends shorting 10-year U.S. Treasuries, which essentially

means the bond price is expected to fall and yields rise.

Yared told Reuters on Wednesday that investors were too

optimistic in pricing 100 bps of rate cuts, which implies a 50

bps cut at one meeting.

He pointed to metrics that show the U.S. economy remains

relatively sturdy, including a stabilisation in commercial and

industrial loans in the second quarter.

"It's no longer consistent with below potential growth," he

said. "And...you're not seeing an acceleration of the weakness

in jobless claims."

Yared also said longer-dated yields should rise to

compensate investors for a more uncertain inflation outlook and

for higher levels of supply hitting the market as U.S. deficits

balloon.

"Inflation risks, even though inflation is coming down now,

they're quite different from what they were pre-COVID... and

supply and demand is also in a materially different place," he

said. "That, I think, is not reflected well enough at the

moment."

A weak August U.S. jobs report at the start of September

could scupper the short 10-year U.S. Treasury trade, Yared said,

by justifying steep Fed rate cuts over the rest of the year.