Goldman Sachs logo - Credit Bloomberg
Treasuries and bunds have rallied in recent weeks as investors grow more concerned about the prospects of an economic slowdown.
Wednesday 09, January 2019
(Bloomberg) --Goldman Sachs has revised down its global bond yield forecasts in the face of slowing economic growth, tighter financial conditions and souring of risk sentiment.
The US bank has revised its 10-year Treasury yield projection to 3 per cent for the year-end, 50 basis points lower than its prior forecast, while its call on German bund yields has been lowered 15 basis points to 0.65 per cent. Forecasts for Canadian yields saw the biggest revision, down 60 basis points to 2.40 per cent.
“We now believe 10-year yields may have peaked for this cycle,” wrote Goldman strategists led by Praveen Korapaty in a note to clients. “While we continue to expect flattening and even modest inversion in the front end of the curve, we no longer expect the 5s30s curve to fully flatten.”
Money markets do not expect the European Central Bank or the Federal Reserve to raise rates at all this year.
UK and Japanese expectations were also downgraded. Goldman revised down its 10-year gilt yield forecast by 25 basis points to 1.85 per cent, with Japan’s lowered 12 basis points to 0.1 per cent.