With Treasury
yields topping 2.7 percent for the first time since August 2011, Goldman Sachs
forecasts a long-term upward trend starting. Their forecast calls for yields in
2014 at 2.75 to 3.00 percent and will climb to 4.00 percent by 2016.
Yields moved
to a near 3-year high following better-than-expected payrolls number on Friday
on expectations that the positive data will prompt the Federal Reserve to start
tapering the current bond purchase program.
From a research note released Sunday by Francisco Garzarelli,
head of market research for Europe at Goldman Sachs: "Factors driving
yields higher include the improving outlook for growth in the U.S. (and partly
also in Europe), a decline in systemic risks stemming from the euro area, and
the reduction in the pace of Fed purchases…In this regard, our U.S. Economics
team now calls for the Fed to announce its intention to taper its monthly
purchases of Treasuries and Agency MBS (mortgage backed securities) in
September.”
The bond sell-off began on May 22, after the minutes of the
Fed's policy meeting signaled that its bond-buying program, which has suppressed
yields and boosted stocks, could soon be tapered. Fed Chairman Ben Bernanke
echoed these comments at a press meeting in June, suggesting that asset
purchases could be scaled back later this year, if economic data continued to
show improvement.
Economic data has been improving, with the Department
of Labor reporting on Friday that 195,000 new non-farm payroll jobs were created
in June, better than estimates of 165,000. The unemployment rate was unchanged
at 7.6 percent.