Some big capitulations from Goldman over the weekend as reflation and commodities bull market fall apart. First, yields:
Revised yield forecasts show 10y USTs at 1.6%, 10y Bunds at -0.15% at YE21. Factors currently weighing on yields should fade, allowing for some normalization, though rebound to much higher levels may take longer than previously expected. Treasury likely to start nominal auction cuts in November, with cumulative reductions more than offsetting duration impact of Fed taper. RRP usage to increase further amid continued TGA decline. Continued strength in Euro-area growth and elevated ECB QE expectations to drive a long-end led selloff. Bank rate path will remain key for the UK curve, favoring intermediate shorts. Divergence between New Zealand and Australia policy path implies differentiated yield outlook.
I am not at all convinced that yields are going higher. They may rise very short term with better US jobs data but the US is slowing right along with China. The Fed is going to taper anyway and exacerbate both. I expect the yield curve to keep reflecting this building policy error with a flattening curve.