Goldman Sachs sees 10-year Treasury yields rising despite Fed rate cut odds

Goldman Sachs' Yield Forecast

Goldman Sachs has projected that the 10-year Treasury yield will rise to 4.40% by the end of 2026, based on a US economy that continues to remain underpinned. The firm anticipates US economic growth to reach 2.3%, surpassing the 2% long-term trend. Such robust growth is expected to 'steepen the yield curve,' as growth runs above its trend rate. While there are expectations of the Fed cutting rates, their objective is actually to stimulate the economy. Goldman Sachs warns that it would be 'self-defeating' for the Fed to keep rates at an 'abnormally low level' because this would lead markets to 'steepen the yield curve.' This steepening means long-term yields outpace short-term yields, signaling expectations for stronger economic growth ahead. Rising fiscal risks and Trump's constant attacks on Fed independence are additional factors to consider. Market participants do not appear to expect further rate cuts soon, with the view that incumbent Chair Powell has already delivered his last cut back in December. Therefore, it's up to the successor to shift the narrative. Traders are pricing in at least two rate cuts for 2026, but given that it is still early in the year, these expectations can shift quickly based on macro developments. It would be a mistake to assume that rate cuts are a given.