From Goldman to BofA, Strategists Try to Call Peak Bond Yields

Wall Street strategists are divided over whether US bond yields will come tumbling down by the end of the year or keep pushing up to new highs.

Some, like Goldman Sachs Group Inc.’s William Marshall, are sticking by their bullish calls, wagering that worries about inflation and swelling government debt loads have run too far and could set the stage for a potential rally into the end of the year. Others, like Anshul Pradhan, head of US rates research at Barclays Capital, say yields may keep climbing and stay there.

That doesn’t mean they see a predictable road ahead. The market is driven by numerous factors that are clouding the outlook, including the energy-price shock of the Iran war, the Federal Reserve’s pivot toward raising rates and the unprecedented AI boom that is pouring fuel on the economy. On Wednesday, the 10-year Treasury yield jumped as high as 5.36% and the 30-year rate shot over 5.7%, levels last seen in 2002.

Here’s what strategists from some major investment banks expect:

Mark Cabana, co-head of global rates strategy at Bank of America Corp.

Bank of America officially forecasts the 10-year yield at 5% by the end of the year, in line with its economists’ current predictions that the Fed will hike rates at its next two meetings in October and December, bringing the economy to an “equilibrium.”

However, Cabana’s team has issued a set of trade recommendations based on the assumption that yields could keep rising. “We don’t think you want to fade it yet. Even though our forecasts are lower, even though we’re operating off of this US economic base case, we judge the balance of risks as suggesting higher rates are more likely than lower ones right now.”

Anshul Pradhan, head of US rates research at Barclays Capital

Barclays Capital raised its forecast for the 10-year yield to 5.25% from 5% for the third quarter of 2027 and sees little reason for yields to come back down anytime soon. “As long as the US economy is resilient, there is no particular catalyst in sight for why yields should fall below 5%.”

Pradhan wrote in a note last week that the 30-year yield could hit 6% if the US economy remains resilient. “The markets are still discounting a long-run neutral rate of around 3.5%, and we think that over time there is scope for productivity to surprise to the upside. If that were to happen, then the markets can reassess that long-run level even higher. And that in our view is going to push 30-year yields to 6%, or at least the fair value of 30-years to 6%.”

Michael Chang, interest-rate derivatives strategist at Citigroup Global Markets

“We do feel pretty good about our 5% year-end forecast” for the 10-year note. The 30-year yield hitting 5.3% by the end of 2026 is “definitely very doable.”

“Right now we’re in a mini-buyer strike, so that makes it very hard for rates to trade near where it’s supposed to. The deviation can be extreme and it can stay there for longer than normal. So we do think it’ll take time. But over the medium term we should trade closer to fair value, which we think is going to be lower from here. Our forecast reflects that bullish bias.”

Matthew Raskin, US head of rates research at Deutsche Bank AG

Deutsche Bank is sticking with its prediction that the 10-year yield will fall to 4.8% by year-end but says the current “level of volatility warrants more of a scenario-based approach to things.”

Raskin says that based on market fundamentals, there’s a chance the 10-year could continue to rise and “plausibly settle in a range of 5% to 5.5% and even above that. I don’t think you have to make a lot of outlandish or stretched assumptions around that stuff to get to yields at or above where we sit today.”

William Marshall, head of US rates strategy at Goldman Sachs

Goldman Sachs expects the 10-year note to fall to 4.75% by year-end, a decline of nearly 60 basis points from Wednesday’s peak. “I think it’s reasonable to still have the constructive medium term view that we do have.”

“We think underlying inflation pressures are fairly well contained. And the reasons that inflation is high at the moment are things that are either in the rearview mirror for the most part, like tariffs, or things like the ongoing conflict” in Iran. “The baseline which we forecast to is that those things ultimately do moderate, and then we’re left with what we think of as the more structural components.”

Jay Barry, head of global rates strategy at JPMorgan Chase & Co.

JPMorgan sees the 10-year yield falling to 5.05% by year-end and says the yield has “reverted to fair value for the first time in six months.”

Still, Barry remains concerned that technical factors could continue to send yields higher. The bank’s most recent “weekly Treasury Client Survey shows our investor base remains net overweight duration, in contrast to the periods around the onset of other hiking cycles — even more limited ones — over the last 30 years. Given this backdrop, and that central banks are tightening across developed markets, it raises the risk that yields can overshoot to the upside as long positions are unwound.”

Martin Tobias, rates strategist at Morgan Stanley

Morgan Stanley expects the 10-year yield to fall to 4.8% by year-end. “The market is priced much more hawkish than our economists’ probability-weighted forecast for the Fed. And just to frame that, our bear case for 10-year Treasuries is 5.25%. So we’ve already effectively reached that on spot, and our bull case — which is tied to a global oil-induced recession — for 10-year Treasuries is 3.8%. And so with market forwards essentially having already priced the bear case, we think the risk around Treasury yields is skewed much more favorably to lower yields.”

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