US LNG exports surge but will buyers in China turn up?
Investing.com - Goldman Sachs maintains a positive outlook on long positions in the front-end of the US yield curve despite recent rate stabilization following last week’s rally. The iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT), a key benchmark for long-term Treasury performance, currently trades at $87.23, showing a 2.95% gain year-to-date while offering a 4.53% dividend yield. According to InvestingPro data, the ETF maintains historically low price volatility with a beta of 0.47.
The investment bank believes risks around the upcoming Consumer Price Index (CPI) data are relatively balanced but favors positions that would benefit from the market pricing in faster interest rate cuts. Goldman is rolling forward its one-month two-year receiver recommendation and adding low strike three-month 2s5s conditional bull steepeners. InvestingPro subscribers can access detailed bond market analysis tools and additional ProTips to navigate Treasury market movements effectively.
For European markets, Goldman notes that the European Central Bank’s on-hold bias is dampening the effect of near-term news, causing EUR rates to take directional cues from the US. The firm recommends shorting ERZ5 versus SFRZ5, expecting EUR rates to underperform with modest spillover effects from the US.
Regarding the Bank of England, Goldman acknowledges its cautious approach to rate cuts, with emphasis on headline inflation upside potentially delaying sequential cuts. With approximately 29 basis points of cuts priced in through February 2026, the firm continues to recommend long SFIZ6 versus ERZ6.
For other markets, Goldman sees room for both Australian and New Zealand yield curves to price in more cuts, though it remains skeptical that next week’s Reserve Bank of Australia decision will provide much impetus in that direction for the AUD curve.
In other recent news, the U.S. Department of the Treasury announced it will offer $125 billion in Treasury securities to refund approximately $89.8 billion of privately-held Treasury notes and bonds maturing in August 2025. This issuance is set to raise new cash from private investors through three offerings: a $58 billion 3-year note, a $42 billion 10-year note, and a $25 billion 30-year bond. Meanwhile, Bank of America forecasts an increase in June’s Consumer Price Index (CPI), which may impact the likelihood of a Federal Reserve rate cut in September. The bank predicts both headline and core CPI to show month-over-month growth, pushing the year-over-year figures higher. Citi, however, maintains that a September rate cut remains likely after analyzing the Federal Open Market Committee (FOMC) Minutes from June. The FOMC Minutes revealed a mixed stance among committee members on the timing of potential rate cuts. In another development, Moody’s has downgraded the U.S. sovereign credit rating from AAA, following similar actions by S&P in 2011 and Fitch in 2023. JPMorgan analysts expect the impact on financial markets to be modest, given historical precedents and existing market structures.
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