Goldman: Beware of Yield Curve Humping

From eFX News:

Focus of the day:

"Our central yield forecasts across the term structure are now broadly aligned with the forward rates: we project 2-yr Treasuries at 80bp (+42bp), 5-yr rates at 2.25% (+60bp), 10-yr at 3.25% (+25bp) and 30-yr at 4.00% (+10bp). In practice, we expect the US Treasury yield curve to flatten and, most noticeably, to become more ‘humped’.

Implications for Rates Strategy:
We draw the following implications for macro rates strategy:
Directionally, we see 5-yr real rates continuing to move higher, possibly faster than our present forecasts (and the forwards). This would be consistent with the US economy expanding at a 3.0-3.5% annualized pace by mid-year (or 100bp faster than in Q4:13) as our US team forecasts....MORE