Goldman Sachs has revised its bond recommendation to neutral, in response to easing inflation and a temporary halt in central bank policy tightening. This marks the first modification in the firm's stance since June 2020. The adjustment comes amidst a global bond rally and paused rate hikes by the US Federal Reserve and Bank of England.
The firm forecasts that 10-year Treasury yields will align with the 300-year average at approximately 4.6% within the coming year. The recent surge in Treasury yields is considered equivalent to about four rate hikes, thereby reducing the need for additional increases.
While potential yield overshoots due to concerns over bond supply and the impact of increasing long-dated bond yields may occur, Goldman Sachs expects these to be short-lived.
Despite adjusting its bond recommendation, Goldman Sachs does not foresee any recession due to the strong state of the US economy.
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