Goldman Sachs Raises US Treasury Yield Forecast Again

10-Year Government Bond Yield Forecast Raised from 2% to 2.25%

1-Year Trend of the U.S. 10-Year Treasury Yield

[Asia Economy Reporter Park Byung-hee] Goldman Sachs has already raised its U.S. Treasury yield forecasts twice this year, Bloomberg reported on the 9th (local time). Bloomberg analyzed that the successive upward revisions of the benchmark interest rate forecasts reflect expectations that the central bank, the Federal Reserve (Fed), will raise the benchmark interest rate rapidly.

In a report released that day, Goldman Sachs forecasted that the 2-year U.S. Treasury yield will rise to 1.9% by the end of this year, a significant upward revision from last month's forecast of 1.35%.

The 2-year Treasury yield recorded 1.36% on the day, already reaching Goldman Sachs' previous forecast. The 2-year Treasury yield surged by 0.50 percentage points over the past month.

Goldman Sachs also raised its forecast for the 10-year Treasury yield from 2% last month to 2.25%.

Goldman Sachs expects the yield curve to flatten in 2023, with both the 2-year and 10-year yields rising to 2.45%. The 2023 forecast for the 10-year Treasury yield was revised up by 0.15 percentage points from the previous 2.3%. The relatively smaller upward revision for 2023 is interpreted as reflecting expectations that the current high inflation will stabilize.

Goldman Sachs stated that it revised its bond yield forecasts upward reflecting overall economic conditions and the Fed's hawkish shift. It analyzed that recent bond selling is due to rising real interest rates. However, it noted that initial strong selling occurred as investors reacted sensitively to the rate hike outlook, and over time, the currently high inflation surge is expected to stabilize.

The 10-year Treasury yield has also risen more than 0.40 percentage points this year. However, it still remains below 2%, leading to analyses that the yield is low. This means that Treasuries, still considered safe assets, are expensive.

Goldman Sachs explained that the persistently low Treasury yields are because investors expect either a return to a low inflation environment soon or a sharp economic slowdown.

This content was produced with the assistance of AI translation services.