Goldman Sachs Forecasts Stabilization of Global Bond Yields
Goldman Sachs predicts government bond yields will stabilize and rate volatility will decline as energy costs fall and stock market turbulence eases.
Strategists at Goldman Sachs forecast a stabilization of government bond yields and a decline in rate volatility, attributing the shift to falling energy costs and reduced stock market turbulence. The 10-year Treasury yield has already decreased to approximately 4.87% from an October peak exceeding 5.25%, while the MOVE Index, which measures Treasury option volatility, dropped to around 93 from a high of 113.
For the United States market, the firm expects 10-year Treasurys to settle within a range of 4.75% to 5.0%. In Europe, the bank anticipates 5-year bonds will outperform as geopolitical risk sentiment improves and risk premiums for oil and gas reduce.
Regarding the United Kingdom, the firm notes that sustained energy relief could support Gilts, although high inflation risk premiums and potential renewed energy concerns may increase hike risks for the front end. In Canada, the firm views potential hawkish repricing caused by U.S. spillovers as an opportunity for front-end long positions.
