FXStreet (Łódź) - The Goldman Sachs team of analysts point out that Fed head Janet Yellen's dovish statements and ECB's monetary policy easing moves last month helped push intermediate bond yields in major markets back to their May lows.
"Adjusted for expected inflation, EUR cash rates now arepriced to stay negative until around 2021, while 10-year real rates are almost as low as their US counterparts during the Fed’s ‘calendar guidance’ period spanning mid-2011 to end-2012."
"We have revised down our forecasts for 10-year German Bund yields,which we now see ending this year at 1.6% (from 2.25% previously), and at2.25% at end-2015 (3.00% previously)."
"Concomitantly, we have shaved25bp off our forecast for 10-year US Treasuries (our forecasts for end-2014and 2015 are now 3.00% and 3.50% respectively) and made adjustments ofsimilar magnitude to the other advanced economies we forecast."
"Our switch from neutral to bearish on the direction of bond markets at thestart of the second quarter was ill-timed, and only partly counterbalancedby a constructive stance on EMU spread markets and inflation swaps."
"Looking ahead, however, we reaffirm our view that yields will rise abovethe forwards, led by a rebuild of the global term premium as the ‘tail risk’of deflation in the Euro area fades, US growth and inflation accelerates, and markets focus on the Fed’s ‘exit strategy’."