Goldman now expects not one but three rate cuts in 2025. What will happen to the treasuries?
Goldman's new forecast for US Treasuries looks slightly softer than market consensus

Goldman Sachs this week revised its expectations for the US Federal Reserve interest rate and, following this, changed its forecast for US government bond yields. It is becoming increasingly difficult to predict the dynamics of treasuries: the increase in duties may result in both an increase and a decrease in their yields, and the adoption of Donald Trump's "big, beautiful" law with large-scale tax breaks increases the risks of increased borrowing due to the reduction in budget revenues.
Details
Goldman Sachs lowered its forecasts for U.S. Treasury bond yields as the bank now expects earlier and more aggressive Fed policy easing. The bank said yields on 2- and 10-year treasuries will be 3.45% and 4.2% by the end of 2025, respectively, rather than 3.85% and 4.5% as it had previously forecast, wrote Bloomberg. Goldman's new forecast looks slightly softer than the market consensus: the average estimate for the yield on government bonds with a ten-year maturity is 4.29%, according to Bloomberg. On July 3, on the eve of the weekend in the U.S., they were traded at a yield of 4.35%.
The revision to the outlook for treasury yields follows Goldman Sachs economists this week updating their expectations for Fed policy easing. They now believe the regulator will cut rates in September, October and December, whereas previously only one cut was anticipated - at the end of 2025. Goldman Sachs' updated rate forecast was released before the July 3 release of strong labor market statistics that reduced pressure on the Fed. But the Wall Street bank stuck to its view, pointing out that the public sector was largely responsible for the job growth.
Context
It is more difficult to predict where bond yields will go now than before, Bloomberg notes. On the one hand, an increase in import duties may accelerate inflation, which usually leads to an increase in bond yields. But the opposite effect may also appear: if the real (inflation-adjusted) income of the population declines, it may hit consumption, slow economic growth and eventually lead to lower rates and bond yields. In addition, on July 4, U.S. President Donald Trump is expected to sign a "big, beautiful" tax relief bill that could increase the budget deficit and raise the risks of increased borrowing.
Like Goldman Sachs, Citigroup and Wells Fargo also expect the Fed to cut interest rates by 75 basis points in 2025. UBS predicts a 100 basis point cut. All four banks believe the downward cycle will begin in September. Goldman Sachs predicts two more rate cuts of 25 basis points each in 2026, reports Reuters.
According to data from CME Fedwatch, Wall Street is pricing in a nearly 70 percent probability of a Fed rate cut in September. The market expects at least two cuts by the end of 2025.
This article was AI-translated and verified by a human editor