Goldman: Fading Fiscal Deal & Virus Concerns Lead To Modest Pullback

Goldman Sachs write that recently "we noted how a steady Biden lead in polls appeared to have pulled forward some of the reflationary repricing we were expecting post-election. Since then, yields have reversed somewhat, though polls have remained steady, and economic data have been mixed. The proximate causes of the backsliding in yields appear to be potential vaccine delays (and a global increase in new virus case counts) alongside dimming odds of a pre-election Phase 4 deal. As we've noted previously, we believe market focus on securing a pre-election deal is somewhat misplaced, given that some form of post-election fiscal support is likely. Furthermore, despite some setbacks, our economists still expect the FDA to grant Emergency Use Authorization (EUA) this year, likely in December (with risks skewed towards January). They also note that the vaccine could boost end-2021 GDP by around 2%. On the whole, our inclination is to look through the news weighing on yields this past week and to retain our bearish outlook on yields going into the election."