Fixed income

Gauges of bond swings have declined almost every day since late March, as optimism has grown that the US and Iran are moving toward a agreement to end a month-long conflict.

Being a diversified global bank, Goldman Sachs was "broadly seen favorably as a relatively safe haven type of credit," said Tony Trzcinka, an investment grade portfolio manager at Impax Asset Management.

The setback pared a weekly gain for US government bonds sparked by an April 8 ceasefire agreement, which caused oil prices to tumble from near multiyear highs.

Oil remained lower by more than 10%, but the benchmark two-year Treasury note, erased its gain for the day, to yield about 3.79%.

Treasuries and gilts especially reflect unrealistic expectations that inflationary pressures will goad central banks into another 2022-style rate-hiking cycle.

Interest-rate swaps showed traders wiped out what little remained of their wagers on Fed easing after unexpectedly strong US labor market data were released Friday.

Concerns that inflation pressures will intensify drove the biggest monthly increase in 10-year Treasury yields in March since late 2024.

The $31 trillion US government debt market "has grown far faster than the quantum of bank capital," creating a gap between the supply and demand for liquidity.

The recent shift in focus toward slowing economic growth is easing fears that central banks will need to adopt an aggressively hawkish stance to control inflation.

While the biggest amount of unwinds occurred on March 2, the new positions added since then have broadly signaled short positions, targeting higher Treasury yields.

The Fed, European Central Bank and the Bank of England all held rates this week as policymakers grapple with the uncertain outlook for inflation and growth arising from the conflict in the Middle East.

Yields in Europe and the US climbed across maturities, with those on two-year US Treasuries — especially sensitive to expectations for Fed policy — higher by 11 basis points to 3.89%.

As war in the Middle East sent oil prices soaring, stoking inflation fears, traders pushed back expectations for the Fed's next rate cut into next year.

Traders are now fully pricing in the next quarter-point rate reduction in mid-2027, and a growing chorus of Wall Street economists have also pushed their calls for the next cut further out the calendar.

Steady cash flows are attracting new capital to music royalty investments, including securitization, as issuers pursue deals with a broader range of artists.

Investors will likely demand higher compensation for longer-dated bonds. Combined with the inflationary pressures from surging energy prices, it's a volatile cocktail for fixed-income investors.

This month's slump in Treasuries "is really a deleveraging dynamic," with traders liquidating long positions as they price in fewer Fed cuts and the risk of hotter inflation.

Treasury yields are up almost a quarter percentage point since the war in Iran started, while traders have pushed back bets on the timing of the Federal Reserve's next interest-rate cut and hikes.

Meanwhile, the February US employment report to be released Friday is expected to show deceleration in job growth, potentially reviving the case for Fed rate cuts.

Traders priced in about 50% odds of more than one quarter-point rate cut by the Fed this year, after fully pricing in two cuts as recently as Friday.