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Goldman Flags $1 Trillion Reason for Fed to Go Slow on Rates

  • Jump in Treasury yields may hurt bondholders more than crisis
  • ‘Significant distress’ seen with central bank tightening
The Federal Reserve’s Comprehensive Capital Analysis & Review, or CCAR, has become one of the most important annual events for the largest banks.
Photographer: Andrew Harrer/Bloomberg

Lurking in the bond market is a $1 trillion reason for the Federal Reserve to go slow on interest-rate increases.

That’s how much bondholders stand to lose if Treasury yields rise unexpectedly by 1 percentage point, according to a Goldman Sachs Group Inc. estimate. A hit of that magnitude would exceed the realized losses since the financial crisis on mortgage bonds without government backing, Goldman Sachs analysts Marty Young and Charles Himmelberg wrote in a note published today.