Goldman, Pimco Detect Irrational Inflation Mania in Bond Market By Bloomberg – Investing.com

Goldman, Pimco Detect Irrational Inflation Mania in Bond Market By Bloomberg – Investing.com

(Bloomberg) -- Goldman Sachs Group Inc (NYSE:). and bond titan Pacific Investment Management Co. have a simple message for Treasuries traders fretting over inflation: Relax.

The firms estimate that bond traders who are pricing in annual inflation approaching 3% over the next handful of years are overstating the pressures bubbling up as the U.S. economy rebounds from the pandemic.

Add to that certain technical distortions in the way market-based inflation expectations are priced, and Goldman Sachs, for one, says the overshoot could be as large as 0.2-to-0.3 percentage point. That gap makes a difference with key market proxies of inflation expectations surging to the highest in more than a decade for shorter maturities.