Goldman Sachs: Fluctuations in U.S. Long-Term Interest Rates Reveal Fiscal Concerns

Goldman Sachs strategists stated in a report that the fluctuations in U.S. interest rates show a contrast between the sharp decline in front-end rate volatility and the long-term volatility at the tail end of the curve. Based on concerns about fiscal matters, "the risk premium in long-term volatility is more pronounced than what is reflected in the direct yield." Over the past month, despite "ongoing macro uncertainty and undercurrents of concern regarding the independence of the Federal Reserve," front-end implied volatility has continued to compress—possible driving factors include increased clarity on tariff risks and "a potential slowdown in U.S. inflation trends." The strategists wrote that compared to previous interest rate cycles, the compression of front-end volatility has limitations, and volatility selling strategies face more bidirectional risks