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Goldman Sachs Sees ‘New Conundrum’ Capping Treasury Yields Surge

  • Higher year-end forecast unveiled only for two-year yield
  • Terminal rate expectations keep pressure on long-end rates
Updated on

Bond buyers face a “new conundrum” where Treasury yields will stay low even as the Federal Reserve hikes rates, despite the surge in the first week of the year, according to Goldman Sachs. 

The investment bank expects the bond market to be reluctant to lift the terminal rate during the coming tightening cycle. So while raising its year-end forecast for the two-year yield, its calls for longer-dated yields stand. Goldman projects the five-year note to end 2022 at 1.8%, the 10-year to climb to 2% and the 30-year to reach 2.25%. A Bloomberg survey of 2022 predictions for these Treasury benchmarks shows median yields of 1.63%, 2.01% and 2.40%, respectively.