Goldman Sachs have recommended entering a...>

US TSYS: Goldman Sachs have recommended entering a 2-/30-Year U.S. Tsy flattener

with a target of 25bp (Q119), & stop loss at 60bp. This is part of their top

trades for 2019 release.

- Goldman writes that "we think the front end of the US Treasury yield curve is

currently underpricing future Fed hikes, and expect further flattening of the

2s30s US Treasury yield curve in the next few months. In our view, the risk that

the Fed gets derailed from its intended path over the next 2-3 hikes is low. The

trade carries negatively, but ex-ante carry at this stage of the cycle typically

tends to be a contrarian indicator of performance as markets have typically

underestimated the extent of a Fed tightening cycle. We see two risks to this

trade. First, yields may turn much more sensitive to elevated supply levels,

keeping the 5s30s portion of the curve steeper than usual. Second, a sizable

exogenous shock to US economic momentum in the next few months could cause the

front end of the curve to rally."