Goldman Sachs expects higher volatility in US bonds

Analysts at Goldman Sachs Asset Management believe that Federal Reserve Chairman Kevin Warsh's comments following his first monetary policy meeting could lead to increased volatility in short-term bonds, while long-term bonds may experience relative calm.

Kay Haig, senior investment manager for fixed income at Goldman Sachs, explained that Warsh's remarks after Wednesday's policy meeting clearly emphasized the priority of combating inflation.

She added that this prompted markets to reprice their expectations for a faster rate hike than previously anticipated, after earlier projections had suggested a delay until the end of the year.

Haig noted that two-year bonds will be the most affected by increased volatility due to their direct sensitivity to monetary policy decisions, while the Fed's move toward greater clarity in its guidance and reduced forward signals could help to moderate long-term bond movements.