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EGBS: Goldman More Cautious On Prospects Of Bund Outperformance Vs. DM Peers

EGBS
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Goldman Sachs’ new yield forecasts point to “around 20bp of further U.S. Tsy/Bund spread widening from current levels, given the sound foundation of economic divergence.”

  • They suggest that “European fiscal support either at the country-level or area-wide level is likely to be modest, and unlikely to alter the 2025 cyclical outlook.”
  • “Likewise, while the ECB is shifting in a more dovish direction, recent communication again underscored the lack of urgency to support the economy.”
  • However, they caution that “the spread widening already embedded in curves suggests that a relatively protracted period of relative economic weakness in the Euro area is increasingly well-priced, and that risk-reward has become more balanced from a cross-market perspective with the UK or U.S”
  • This leads them to conclude that “the clearest path to lower European yields in the near-term may be relief from global duration where pricing, in our view, has turned too bearish in the last month.”
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Goldman Sachs’ new yield forecasts point to “around 20bp of further U.S. Tsy/Bund spread widening from current levels, given the sound foundation of economic divergence.”

  • They suggest that “European fiscal support either at the country-level or area-wide level is likely to be modest, and unlikely to alter the 2025 cyclical outlook.”
  • “Likewise, while the ECB is shifting in a more dovish direction, recent communication again underscored the lack of urgency to support the economy.”
  • However, they caution that “the spread widening already embedded in curves suggests that a relatively protracted period of relative economic weakness in the Euro area is increasingly well-priced, and that risk-reward has become more balanced from a cross-market perspective with the UK or U.S”
  • This leads them to conclude that “the clearest path to lower European yields in the near-term may be relief from global duration where pricing, in our view, has turned too bearish in the last month.”