Goldman Underweight Govt. Bonds (TLT), Neutral Corp. Bonds (LQD), Downgrades Cash

July 17, 2012 10:08 AM EDT
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Strategists at Goldman Sachs are neutral on corporate credit, given uncertainty and already high levels. On a 12-month time horizon, they are overweight corporate bonds and see spreads narrowing amid solid fundamentals and improving growth momentum. They expect a -1 percent return over 3 months and a +2 percent return over 12 months.

With yields close to record lows, strategists at Goldman have little love for government bonds. Given macro fundamentals, the risk/reward is skewed to the downside. They are underweight government bonds with a 12 month view. The 10-year bond could return -3 percent over the next 3 months and -5 percent over in 12 months.

Goldman strategists downgraded U.S. government bonds to underweight. They also downgraded cash to underweight.

iShares IBoxx $ Invest Grade Corp Bd Fd (NYSE: LQD) is higher by 5.34 percent year-to-date.

iShares Barclays 20+ Yr Treas.Bond ETF (NYSE: TLT) is higher by 8.6 percent year-to-date.

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