There is good news for fixed income investors this year, according to Goldman Sachs Asset Management. Bonds had a brutal 2022 as the Federal Reserve raised interest rates to fight inflation. Prices fell, and because prices and yields move in opposite directions, yields soared. For example, the 10-year US Treasury started the year with a yield of 1.5% and exceeded 4% in 2022. This year, inflation and the pace of monetary tightening will slow, as well as economic growth, Goldman said. Yet the timing and extent of the improvement in inflation is uncertain and there is always the risk of a recession, Sam Finkelstein, Chief Investment Officer of Fixed Income and Liquidity Solutions, and Whitney Watson, Head of the management of fixed income portfolios, construction and risk, written in a note. “But amid elevated uncertainty and mixed signals from economic data, one thing is clear: it’s time to introduce bonds. We believe the sharp rise in yields in 2022 offers bond investors the potential for income and most attractive total return in more than a decade,” they said. Goldman Sachs claims to manage $1 trillion in fixed income assets. In the short term, Goldman Sachs Asset Management favors income assets short-term, high-quality fixed assets, such as investment-grade credit securities and mortgage-backed securities (MBS) Finkelstein anticipates “high single-digit returns” MBB 1Y mountain iShares MBS ETF tracks securities backed by investment-grade U.S. agency mortgages,” he added. “Once inflation normalizes and growth prospects become clearer, Goldman thinks it’s It will be possible to add exposure to cyclical assets, including high yield credit and emerging market debt. – CNBC’s Michael Bloom contributed reporting.
