Goldman Sachs Delta-one head Rich Privorotsky says current rate pressure is
increasingly a bond-supply problem. Recent US data has softened and pushed down
short-end yields, but long-end yields remain under pressure as markets must
absorb large sovereign deficits and potentially more than $1tln a year of
AI-related capex increasingly financed via the debt markets. Privorotsky says
markets will need higher real rates to absorb that supply, implying long-term
yields may not fall even if growth weakens; the curve could remain split — short
end driven by data and central bank policy, long end constrained by fiscal and
financing supply. He flags an extreme scenario where a loss of anchoring at the
long end forces the Fed to stay tighter amid weak data to flatten the curve and
stabilize long-term rate expectations. He identifies the mid-term market’s
The biggest risk as long-end rates, not the timing of a single rate cut.
