Goldman: Real Yields Approaching Natural Valuation Constraints

Wednesday saw Goldman Sachs note that "real yields in the U.S. Treasury market are approaching natural valuation constraints, suggesting that the recent sell-off in longer maturity real rates has limited further room to go - we believe 10-Year TIPS yields are unlikely to sell off by more than 20bp from current levels over the near term. The plausible timeline for Fed liftoff as well as still-low global neutral real rates should limit the extent of repricing for now. There are risks to this view from another "taper tantrum" and a possible upward revision to market perceptions of neutral rates. But initial conditions in the bond market are different from in 2013, and we doubt neutral rate expectations will rise without a major repricing of yield curves in Europe and Japan."