Goldman Sachs strategists George Cole and William Marshall report that 30-year US Treasury yields have reached approximately 5.2%, marking a nearly 20-year high. The firm advises investors to remain cautious regarding long-duration bonds, as structural economic forces are expected to keep yields elevated.
The report identifies sustained fiscal deficits and government borrowing for AI infrastructure as primary drivers of high yields. Goldman estimates that AI-related investments could contribute roughly 1% to global GDP. Additionally, energy prices continue to influence inflation expectations, though analysts expect this pressure to ease within six months.
The trend is global: as of September 8, long-maturity bond yields in the UK and Japan hit decade-highs, while German yields reached their highest level since 2009. The US Treasury plans to buy back up to $6 billion in bonds with 10-to-20-year maturities, but analysts doubt this will significantly lower yields.
Despite the risks, the firm notes that higher yields make bonds more effective as portfolio hedges during economic downturns. Strategists suggest that five-year bonds may offer a better balance of risk and protection compared to longer-dated securities, as they carry less interest rate risk while still providing diversification.
