-0.9 C
New York
Thursday, December 9, 2021

Your Dovish Take on Powell Is Wrong, Goldman Tells Bond Traders

Your Dovish Take on Powell Is Wrong, Goldman Tells Bond Traders© Reuters. Your Dovish Take on Powell Is Wrong, Goldman Tells Bond Traders

(Bloomberg) — Goldman Sachs Group Inc (NYSE:). is telling traders to be wary of reading Federal Reserve Chairman Jerome Powell’s comments last week as dovish for the path of interest rates.

Ten-year Treasury yields fell Friday on Powell’s speech at the Kansas City Fed’s annual policy symposium, when he said “there does not seem to be an elevated risk of overheating.” What’s more, the maturity’s spread over two-year yields is close to the lowest since 2007.

Goldman rates strategists lowered their year-end 10-year yield forecast last week on the back of a slower rebound in term premium. Yet in a report Monday, Goldman economists emphasized Powell’s nod to a recent Fed study that indicated it would be ill-advised for the central bank to ignore low unemployment. That emboldened the Goldman economists to reiterate their call for two more rate hikes in 2018 and four next year.

“Unlike the bond market, we did not view Powell’s speech as dovish, partly because of its references to the Fed staff study,” Goldman Sachs economist Daan Struyven wrote in the note. “We expect not only a limited core inflation overshoot but also a sizable unemployment undershoot — and an FOMC that continues to care about that undershoot.”

U.S. money-market traders aren’t on board with a tightening path as aggressive as Goldman predicts, or even the Fed’s own projections. For this year, traders see a September hike as a lock, yet haven’t fully baked in another in December.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Source: Investing.com

Related Articles

Stay Connected

10,934FansLike
12,893FollowersFollow
753FollowersFollow
- Advertisement -

Latest Articles

Popular Articles