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Because the Fed is able to make its price resolution, Wells Fargo predicts the 10-year return might attain 2.25% this yr

Don't rule out a 10-year Treasury note return of 2.25% this year.

This is the message from Michael Schumacher of Wells Fargo Securities ahead of the Fed's rate decision on Wednesday.

"The fiscal incentives are huge and vaccine adoption seems to be accelerating quite a bit – not just here in the US," the company's head of macro strategy told CNBC's Trading Nation on Tuesday. "Many things come together to increase returns."

Still, Schumacher said his firm doubts that Fed Chairman Jerome Powell will show immediate concern.

"He's been pretty confident about the overall increase in earnings. We think he'll keep that stance tomorrow," he said. "Our view at Wells Fargo is that he's not really going to try to slow it down."

Instead, Schumacher said he expected Powell to associate rising yields with a vote of confidence in the economic recovery, suggesting that this is catching up for such a long period of low inflation.

"The world has never seen such a coordinated reopening. Not even after World War II," said Schumacher. He said he thought Powell would signal a willingness to let inflation run above its 2% target "for a while".

In December, Schumacher predicted on Trading Nation that Covid-19 vaccines would dramatically boost confidence and raise government bond yields in 2021. So far this year the benchmark return has increased 77% for 10 years. On Tuesday it closed at 1.62%.

"Returns started this year – if you focus on the 10-year Treasury – north of 90 basis points. This year it's about 70 basis points." "So, 1.75% to 2%, I would say, could happen pretty quickly."

By next year, said Schumacher, the return could rise above 3%. Those levels could cause the Fed to hike rates sooner than Wall Street expects: 2022 instead of 2023, he said.

"The biggest risk … is that people will underestimate the amount by which the economy will recover," said Schumacher. "Maybe we're all a little too conservative."

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