Treasury 10-year notes headed for a third straight decline as Goldman Sachs Group Inc. is warning that U.S. government bonds are expensive with volatile stock markets determining direction.

Benchmark 10-year yields climbed as U.S. shares rallied Thursday. Traders have reduced bets that the Federal Reserve will raise interest rates this month amid elevated global volatility and as a slump in oil prices has sapped inflation. A $13 billion auction of 30-year bonds yielded 2.98 percent, the highest since July, and drew record demand from a group of investors including foreign central banks and mutual funds.

“With yields close to 3 percent, there’s demand,” said Thomas Simons, a government-debt economist in New York at Jefferies Group LLC, one of the 22 primary dealers that trade with the Fed, referring to the auction. “All eyes are definitely on the Fed at this point.”

Treasury 10-year note yields rose three basis points, or 0.03 percentage point, to 2.23 percent as of 2:31 p.m. New York time, based on Bloomberg Bond Trader data. They reached 2.25 percent on Wednesday, the highest since Aug. 6. The 2 percent security due in August 2025 fell 1/4, or $2.50 per $1,000 face amount, to 97 31/32.

Indirect bidders bought 66 percent of the 30-year bonds at the auction, the most since Bloomberg started compiling the data in 2006. A sale of benchmark 10-year notes on Wednesday drew the highest yield since June.

‘Unusually Depressed’

“Intermediate maturity Treasuries still look stretched on current valuations,” London-based Goldman Sachs analysts Francesco Garzarelli, Silvia Ardagna and Rohan Khanna wrote in a note to clients dated Sept. 9. “The term premium is now unusually depressed — indeed, it is close to zero.”

The gap between two- and 10-year Treasury yields was at 149 basis points, after touching a four-month low of 135 basis points on Aug. 24 as the global stock rout intensified. The average over the past five years has been 194 basis points.

The Goldman Sachs analysts said they “expect the two-to-10- year slope of the U.S. Treasury curve to steepen over the next three months to around 175 basis points.”

Futures traders have pared bets for liftoff at the Fed’s Sept. 16-17 meeting, with the probability at 28 percent from 54 percent on Aug. 7. The chance of an increase in interest rates in December was at 60 percent. The calculation is based on the assumption that the effective fed funds rate will average 0.375 percent after the first increase.