US bond yields rise on Goldman update

U.S. 2- and 5-year bond yields rose to yearly highs as swap traders and the Goldman Sachs Group predicted that the Fed would cut interest rates less. U.S. 2- and 5-year bond yields rose to yearly highs as swap traders and the Goldman Sachs Group predicted that the Fed would cut interest rates less. The 2-year yield, which at one point yesterday reached its highest level since December 11 at 4.749 percent, then gave back its gains and finished the day flat. The yield on 5-year bonds at one point hit 4.367 percent, its highest level since November 28. Swap agreements for the Fed’s interest rate decisions at one point on Monday priced in a rate cut in June as less than a 50 percent chance. Swap investors also forecast a total cut of 69 basis points this year. That’s lower than the three-quarter-point cut that the Fed’s official forecast at its December interest rate decision meeting had signaled. Meanwhile, Goldman Sachs economists revised their forecast for the Fed’s monetary policy to forecast three quarter-point cuts this year instead of four, “mainly due to a slightly higher inflation path.” The economists, led by Jan Hatzius, continue to predict the first rate cut in June, with four more in 2025 and a final rate cut in 2026. The agency maintained its final interest rate forecast at 3.25%-3.5%. Goldman economists think Fed officials will begin an easing cycle in June to reduce the risk of keeping interest rates too high for too long, even as they believe the downward trend in inflation has slowed.