Goldman Sachs Says Investors Unprepared for U.S. Curve Inversion
- Term structure of inflation expectations is predictive
- Sees ‘an earlier or deeper inversion’ of nominal forwards
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Investors’ inflation expectations suggest that U.S. yield-curve inversion is going to take them by surprise, according to Goldman Sachs Group Inc.
The U.S. bond market has been dominated in recent months by sharp narrowing in the spread between short- and long-dated Treasury yields, fueled by expectations for Federal Reserve rate increases. The trend gathered pace in the two weeks since Russia’s invasion of Ukraine unleashed a surge in energy prices that threaten to boost inflation further. The gap between the two- and 10-year tenors breached 20 basis points Monday, down from over 90 basis points in early January.