Steepening Global Yield Curve: Persistent Drivers Keep Long-Term Bond Yields High

Global bond yields are expected to remain elevated due to fundamental reasons, according to Goldman Sachs Research. George Cole, head of European rates strategy in the Global Macro and Markets Research Group, noted that the recent rise in yields has been orderly and not driven by a surge in volatility.

The main drivers behind the increase in global bond yields are growing fiscal deficits in developed economies since the COVID-19 pandemic and soaring borrowing for artificial intelligence (AI) investment. This increased demand for borrowing is putting pressure on the pool of global savings available to fund it, leading to higher yields.

Goldman Sachs Research expects worries about increasing inflation from energy prices to decline in the next six months as there will be more visibility into the return on AI investment, which could relieve some of the pressure on bond markets. However, Cole pointed out that fiscal concerns are unlikely to disappear anytime soon.