Goldman Sachs: Interest Rate Markets Shift to Hawkish Expectations Amid Oil Price Shock

Odaily News Goldman Sachs strategists stated in a report that the oil price shock has caused a sudden shift in interest rate markets, which have begun trading along hawkish policy dimensions. They noted that the risk outlook for higher overall inflation has now taken precedence over growth concerns, and the resurgence of supply-side fluctuations has weakened the recently re-emerged value of duration hedging. "Although the weak (U.S.) jobs report last Friday provided some renewed support to the front end of the curve, the market's reaction to the disappointing data was notably muted," the strategists said. They added that despite volatile movements, the absolute level of the 10-year U.S. Treasury yield is not unreasonable, longer-term forward rates remain broadly appropriate, and are consistent with long-term growth expectations across countries. (Jin10)