By David Randall

NEW YORK A slowdown in the U.S. economy over the remainder of the year due to higher oil prices and the resumption of student loan payments will likely pull benchmark 10-year Treasury yields lower, making call options on the iShares 7-10 Year Treasury Bond ETF attractive, Goldman Sachs strategists wrote in a note Thursday.

Treasury yields, which move inversely to prices, hovered near their highest levels since 2007 on Thursday, continuing a bond market selloff that has pushed yields up by more than 40 basis points since the start of October. Overall, Treasuries are on pace for an unprecedented third consecutive year of declines.

At close to 5%, 10-year Treasury yields are significantly above their fair value of 4.2% to 4.3%, Goldman Sachs noted. Treasuries will likely rally as the economy hits a "pothole" in the fourth quarter, Goldman Sachs said.

"The key risk to this trade is that U.S. data is stronger than expected leading yields to fall less than our strategist expects," Goldman Sachs wrote.

Rising debt costs will likely prompt the federal government to cut spending, leaving a recession "around the corner," said Scott Wren, senior global market strategist at the Wells Fargo Investment Institute.

Government debt servicing will rise from $7.24 billion in 2024 to $1.4 trillion in 2033, in part due to higher rates, according to Wells Fargo.

"We believe today investors are being offered an opportunity to lock in yields that are higher than they have seen in decades," Wren wrote in a note Wednesday.

(Reporting by David Randall; Editing by Will Dunham)