Why Goldman Sachs Believes the Treasury Yield Could Rise
Goldman Sachs on Treasury yield
In a recent interview with CNBC, David Kostin, chief US equity strategist at Goldman Sachs (GS), shared his view on bond yields. Since the US election, the yield curve is flattening. It hasn’t shown any significant improvement or decline. A flattening yield is often a warning signal about economic conditions (SPY) (QQQ).
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However, David Kostin believes that the Treasury yield could rise in the near future, as he believes that the Fed might continue its gradual rate hike process. Expectations for rising inflation are also increasing, according to Kostin. If inflation continues to rise, the Fed is likely to continue its rate hike process. Rising interest rates push bond (BND) yields up and bond prices (TLT) (SHY) down.
35-year bond bull market
On the other hand, the bond market has shown a huge rally in the last 35 years. If we look at the ten-year US Treasury yield for the last 35 years, we can see that it’s showing a downward slope. Billionaire investor Bill Miller also said recently that the 35-year bond bull market will see its end.
In the next part of this series, we’ll analyze David Kostin’s view on the financial sector.