Goldman: Don't fear the yield curve

|About: BlackRock Enhanced Governme... (EGF)|By:, SA News Editor

The last time the U.S. Treasury was this flat was before the 2008 financial crisis. That doesn't mean there's a serious risk that the same thing will happen this time, Goldman Sachs said in a research note, according to Bloomberg.

Three of the last 10 times the yield slope inverted, no recession followed over the next two-year period, strategists led by Praveen Korapaty wrote in a research note.

The spread between the 2-year and 10-year Treasury note yields narrowed to 23.4 basis points on Friday, the narrowest since August 2007; the last time the curve inverted was in June 2007.

Things that are different this time: Fed's portfolio reduction, a more gradual pace of interest rate hikes by the Fed, and a late-cycle fiscal stimulus, according to the note.

“The impact of flattening in the term spread on bank profits, while significant for smaller banks, is marginal for larger institutions," the analysts wrote.

In late morning trading, New York time, 10-year U.S. Treasury note yield was at 2.861% and the 2-year yield at 2.62%.

(TLT +0.3%), (TBT -0.5%)

Other Treasury bond ETFs: PLW, GOVT, EGF, TAPR, FTT, FIBR, USTB

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