Goldman to Bond Traders: You're Underestimating U.S. Inflation

Bond traders’ inflation expectations are way too low, say analysts at Goldman Sachs Group Inc.

Sliding energy prices and slowing global economic growth have weighed down a measure of inflation expectations known as the 10-year break-even rate -- the gap between yields on Treasury notes and inflation-linked debt of that maturity. The gauge has rebounded from a six-year low set in September, and Goldman Sachs says it’s poised to keep climbing as oil prices stabilize and the U.S. economy accelerates. Rick Rieder, chief investment officer of fundamental fixed income at BlackRock Inc., wrote in a separate note that the drop in oil distorts inflation readings.