Goldman Sachs strategists, led by George Cole, have revised their Treasury yield forecasts ahead of President Trump’s Rose Garden announcement.
The team significantly lowered its year-end projections: they now expect the 2-year Treasury yield to finish 2025 at 3.3% (down from 3.95%) and the 10-year yield to end the year at 4.0% (down from 4.35%).
Goldman attributes the change to an anticipated “more severe tariff baseline,” which the strategists estimate would raise effective tariff rates by a cumulative 15 percentage points. That shift in trade policy is expected to add upward pressure to inflation.
Specifically, Goldman projects core PCE inflation could climb to about 3.5% year-over-year. At the same time, the bank warns that the economy is likely to slow, a combination that would prompt the Federal Reserve to begin easing policy: Goldman now expects three consecutive quarter-point rate cuts starting in July.
Given these dynamics, Goldman cautions that Treasury yields may move below their revised forecasts at times as markets weigh recession risks against signs of underlying economic strength. In short, higher tariff-driven inflation and a softer growth outlook could produce a period of volatility in government bond markets before yields settle near the bank’s updated targets.