Bond investors never had it this good in 4 years
Economists at Goldman Sachs Group, which earns more than any other securities firm trading bonds, said they underestimated Treasuries and now expect yields on 10-year notes to fall to 4.30% next year from 4.43% on December 1.
By Agencies |
BOSTON: TREASURY bond investors are so bullish even Federal Reserve chairman Ben S Bernanke and Alan Greenspan can’t stop the biggest rally in four years.
Economists at Goldman Sachs Group, which earns more than any other securities firm trading bonds, said they underestimated Treasuries and now expect yields on 10-year notes to fall to 4.30% next year from 4.43% on December 1. Lehman Brothers Holdings abandoned its forecast that the Fed will raise the target for overnight loans between banks next year.
What makes the gains remarkable is that traders increased bets the central bank will lower its 5.25% target in the first quarter at the same time Bernanke predicted faster economic growth and said inflation remains “troublesome”. Greenspan, the former chairman of the Fed, also cautioned traders, predicting 10-year yields will return to “civilized territory”.
“The bond market is effectively saying the Federal Reserve is in denial and there’s going to be more pain to the economy,” said Michael Cheah, who manages about $2 billion in bonds at AIG SunAmerica Asset Management in Jersey City, New Jersey. The benchmark 10-year Treasury note was little changed in Singapore, according to Cantor Fitzgerald.
The yield was 4.44 percent and had dropped from 4.55% on November 24 as the Commerce Department said the economy grew at a 2.2% pace in the third quarter, the slowest this year, and home construction fell the most since 1991.
Treasuries have returned 3.99 percent since last December, the most since 2002, according to data compiled by Merrill Lynch & Co. All the gains came since the Fed ended its series of 17 interest-rate increases in June.
Economists at Goldman Sachs Group, which earns more than any other securities firm trading bonds, said they underestimated Treasuries and now expect yields on 10-year notes to fall to 4.30% next year from 4.43% on December 1. Lehman Brothers Holdings abandoned its forecast that the Fed will raise the target for overnight loans between banks next year.
What makes the gains remarkable is that traders increased bets the central bank will lower its 5.25% target in the first quarter at the same time Bernanke predicted faster economic growth and said inflation remains “troublesome”. Greenspan, the former chairman of the Fed, also cautioned traders, predicting 10-year yields will return to “civilized territory”.
“The bond market is effectively saying the Federal Reserve is in denial and there’s going to be more pain to the economy,” said Michael Cheah, who manages about $2 billion in bonds at AIG SunAmerica Asset Management in Jersey City, New Jersey. The benchmark 10-year Treasury note was little changed in Singapore, according to Cantor Fitzgerald.
The yield was 4.44 percent and had dropped from 4.55% on November 24 as the Commerce Department said the economy grew at a 2.2% pace in the third quarter, the slowest this year, and home construction fell the most since 1991.
Treasuries have returned 3.99 percent since last December, the most since 2002, according to data compiled by Merrill Lynch & Co. All the gains came since the Fed ended its series of 17 interest-rate increases in June.
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