Goldman Sachs, led by strategist William Marshall, notes that the current environment is conducive for government bond yields to settle into a defined range, particularly if volatility in risk assets decreases and energy prices remain stable.
The 10-year Treasury yield currently stands at approximately 4.87%, down from over 5.25% earlier in October, while the MOVE Index, which tracks Treasury option volatility, has decreased to around 93 from a peak of 113. Looking ahead, Goldman anticipates that if risk assets stabilize, yields could establish a range between 4.75% and 5.0% for 10-year Treasurys, with reduced rate volatility.
In Europe, the market has adjusted expectations for European Central Bank rate hikes, reflecting improved sentiment regarding geopolitical risks and energy prices. In the U.K., while there are concerns about renewed energy issues potentially impacting front-end yields, Goldman maintains a medium-term outlook favoring a steepening of the yield curve.
For Canada, any hawkish shifts in U.S. rates could present opportunities for investors to engage in front-end positions