Goldman Sachs warns investors to remain cautious on long bonds as 30-year yields hit two-decade highs

The 30-year US Treasury yield is sitting at roughly 5.2%, its highest level in nearly twenty years. Goldman Sachs says don’t expect relief anytime soon.

In a report published September 9, Goldman strategists George Cole and William Marshall laid out the case for a persistently steep global yield curve, driven by structural forces that no amount of Treasury buybacks is likely to fix. The bottom line for investors: long-duration bonds remain a minefield, even if recent selloffs have made them slightly more useful as portfolio hedges.

Why yields are staying elevated

The Goldman team points to a handful of forces conspiring to keep long-end yields high. Sustained fiscal deficits across developed economies top the list, a hangover from pandemic-era borrowing that governments have shown little appetite to unwind.

Then there’s the AI spending boom. Goldman estimates that AI-related investment could add roughly 1% to global GDP, with governments borrowing heavily to finance their share of the buildout.

Energy prices are piling on additional pressure, stoking inflation concerns that make investors demand higher compensation for holding bonds over longer time horizons. Cole and Marshall do expect energy-driven inflation to ease over the next six months, but they frame that as a temporary reprieve rather than a structural fix.

A global phenomenon

This isn’t just an American story. As of September 8, long-maturity bond yields in Japan and the UK have climbed to decade-high levels. Germany’s equivalent yields are at their highest since 2009.

The US Treasury has announced plans to increase buybacks of longer-dated securities, with up to $6 billion earmarked for bonds in the 10-to-20-year maturity range. Goldman’s strategists are politely skeptical, projecting that buybacks at this scale won’t meaningfully dent yields that are being driven by much larger structural forces.

What this means for portfolio strategy

Recent selloffs have actually increased the case for holding some bonds in multi-asset portfolios. When yields are higher, bonds generate more income and have greater capacity to rally during economic downturns, making them better diversifiers.

The strategists suggest that the five-year segment of the yield curve could serve as a more effective hedge if growth or inflation dynamics shift. Shorter-duration bonds carry less interest rate risk, meaning they won’t crater as badly if yields keep climbing, while still offering meaningful protection if the economy stumbles.

Goldman’s view implies that the forces driving yields higher—fiscal deficits, AI infrastructure spending, sticky inflation—are not cyclical blips but structural features of the post-pandemic economic landscape. Goldman’s answer to whether “cheap” long bonds represent value given this fiscal trajectory is essentially: probably not.