LONDON, Jan 5 (Reuters) - Goldman Sachs on Thursday raised its end-year forecast for the 10-year U.S. Treasury yield to 3.0 percent from 2.75 percent, as investors price in further U.S interest rate increases and an expected fiscal boost from the incoming Trump administration.
“Over the balance of the year, we expect the trend of higher 10-year government bond yields to extend,” the U.S. investment bank’s rates strategists wrote in a note to clients on Thursday.
If the U.S. and global economy performs as well as they expect, the yield will rise to around 3.25 percent at the start of 2018 before stabilizing around 3.50-3.75 percent in 2019-20.
The 10-year U.S. yield, considered the global benchmark long-term interest rate, was trading at 2.42 percent on Thursday. According to Goldman’s analysts, that’s closer to their estimates of ‘fair value’ than at any time since 2013 but still on the low side.
The yield fell to a multi-decade low of 1.3210 percent in July last year but has been rising since, driven by a global bond market selloff as investors bet that U.S. and global inflation is coming back to life. (Reporting by Jamie McGeever; editing by Patrick Graham; Editing by)