(Adds UK, Japanese yield forecast changes)
By Jamie McGeever
LONDON Jan 5 Goldman Sachs on Thursday raised
its forecasts for bond yields around the world in the coming
years, predicting that the global fixed income selloff has
further to run as inflation and economic growth accelerate.
Goldman now expects the 10-year U.S. Treasury yield to end
this year at 3.0 percent, up from its previous call for 2.75
percent, as investors price in further U.S interest rate
increases and an expected fiscal boost from the incoming Trump
The U.S. investment bank also said it expects higher British
and Japanese yields than previously anticipated, especially UK
gilt yields amid the economic and financial uncertainty
surrounding Brexit and increased UK bond supply.
"Over the balance of the year, we expect the trend of higher
10-year government bond yields to extend," Goldman'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.
The 10-year UK gilt yield is expected to end this year at
1.90 percent, up from Goldman's previous forecast of
1.65 percent and current level of around 1.35 percent. It's
expected to hit 3.0 percent by 2020, Goldman reckons.
Japan's 10-year yield is seen rising to 0.20 percent
this year and 0.50 percent next year, compared with
the previous forecasts of 0.15 percent and 0.30 percent,
The Bank of Japan currently has a policy of pinning the
10-year yield at around zero in a bid to stimulate growth and
Goldman kept its German Bund yield forecasts unchanged at
0.80 percent this year, 1.35 percent next year and
rising to 2.10 percent by 2020.
(Reporting by Jamie McGeever; Editing by Patrick Graham and