Goldman Sachs Group Inc. cut its year-end Treasury yield forecast as the prospect of a divided Congress under a Democratic president makes another big fiscal stimulus package unlikely.

The 10-year yield should fall to around 0.75% by the end of 2020, according to strategists including Praveen Korapaty. That’s well below the 1.05% target that the team had anticipated before the election.

There’s still a small chance that a Democratic sweep re-enters the narrative, should Georgia’s Senate runoff elections appear to favor the party, the strategists added.

“We expect markets would be more cautious in reprising that anticipatory repricing this time around, suggesting that at least to year-end, rates markets are likely to trade with a divided government baseline,” the strategists said. “We do expect many of the reflation themes we had previously highlighted to reappear, but not until the second quarter of 2021.”

News on the coronavirus spread and vaccine development should take over as a key driver for the rates market into year-end, according to Goldman.

Investors have piled back into Treasuries, swinging from record short positions in the space of a week, with the U.S. 10-year yield down 14 basis points from its intraday high on Nov. 4. The rate rose six basis points on Friday after the U.S. reported stronger-than-expected nonfarm payrolls. It fell one basis point to 0.81% on Monday.

No Consensus

Goldman’s call, however, contrasts with strategists at BMO Capital Markets and Citigroup Inc., who still see yields climbing to touch at least 1% by the end of December as the focus turns to signs of economic rebound.

Morgan Stanley are also bearish, though recommend investors shift from shorting Treasuries outright to initiating trades positioning for the gap between five-year and 30-year yields to steepen.

Goldman also pulled back from a forecast rise in German yields, seeing the 10-year bund finishing the year at minus 0.60%, from minus 0.25% previously. That’s still higher than their current level of minus 0.63%.