Says that there is little scope for the FOMC meeting this week to be a catalyst for movement in the rates market
The firm's chief interest rate strategist, Praveen Korapathy, argued that 10-year Treasury yields will probably climb towards 2% if the US and China reach a "Phase One" trade deal but further upside beyond that will probably be limited.
Adding that while risks ahead are substantial, their base case remains for a trade agreement that includes a reduction in existing tariffs and avoids those due to take effect on 15 Dec.
With regards to other events this week, the firm notes that the FOMC meeting should not produce any surprises so it is unlikely to cause a stir in markets.
Just to note, Goldman Sachs' view for Treasuries next year is that they will end 2020 at around 2.25% "on account of the improved economic outlook and the removal of some tail risks i.e. trade war, Brexit".
As for the "Phase One" deal, I reckon there could be an initial hint of optimism but as soon as markets get a grip of the fact that the deal isn't a major game changer in US-China trade relations, the 'sell the fact' trade may be more profound in my view.
But we'll see. First, we need the deal to materialise. Right now, it's still a matter of "if".
