Halister News

(Bloomberg) -- Expect the increase in long-dated yields to extend into 4Q, with 10Y USTs reaching 2% by year-end, bunds at 0.3% and JGBs at 0.1%, writes Goldman Sachs analyst Francesco Garzarelli in a client note.

• Views based on three considerations:
  • Macro bond valuations are still stretched, with deterioration of macroeconomic expectations not enough to justify sharp drop in yields
  • Central banks weigh benefits of QE vs cost of depressing long-dated yields excessively
    • BOJ, ECB have put QE operations under review, as fall in ultra-long dated yields has resulted in costs and distortions that counterbalance economic benefits of lower real rates
  • Greater focus on role of fiscal stimulus in reflating economy, discussions in the U.S. have been linked to election outcome, and the market has been increasingly responsive to such moves