Episode summary
“I’d Rather Be a Bond”
The Markets
· · Hosts: Chris Hussey · Guests: Lindsay Rosner
Summary
Bond yields have moved sharply higher as markets reprice the effects of the Iran conflict as an energy-driven inflation shock. Lindsay Rosner says the front end of the curve has sold off more than the long end, creating a bear-flattening move as traders shift from pricing in Fed cuts to pricing in hikes or a longer pause.
Rosner’s base case is still that the Fed cuts two times in 2026, even though the market has moved to a no-cut view for the rest of the year. She argues that core PCE and labor-market caution still give the Fed room to ease later, because the central bank can look through some energy volatility even as it balances inflation against employment.
On credit, she says spreads are wider but not signaling recession. Investment-grade spreads are about 6 basis points wider and high yield about 40 basis points wider, but she sees that as a modest move from already-tight levels. Her conclusion is that bonds are attractive relative to stocks because yields have risen enough to create real yield, while balance sheets remain strong and growth should stay above trend.
Key takeaways
- Lindsay Rosner says the bond market has shifted to a bear-flattening move, with front-end yields rising faster as traders price inflation risk and possible central-bank hikes.
- Rosner’s modal case is still that the Fed cuts two times in 2026, even though the market has priced out those cuts and now expects no easing.
- She says investment-grade spreads are about 6 basis points wider and high yield about 40 basis points wider, but not wide enough to signal recession.
- Rosner argues bonds are preferable to stocks right now because higher base rates and modestly wider spreads have created real yield.
- She expects four major central-bank meetings in the US, Japan, the ECB and the UK to bring clarity on whether policymakers will actually hike.
Notable quotes
“the bond market, particularly more in the front end than the back end, is thinking about what will central banks do next”
“we still feel that the modal case is that they will cut two times this year”
“Bonds have typically been a ballast in a portfolio, and why? Well, if there's any risk off in the market”
“Spreads are slightly wider. Investment grade, six basis points wider as of today. High yield, also, like, on the order of 40 basis points wider”
“I have to think to myself, what would I rather be, a bond or a stock? And I'd rather be a bond”
How the episode opens
This is The Markets. I'm Chris Hussey, and today is Wednesday, March 25th, and I'm here with Lindsay Rosner, who is head of Multi-Sector Investing within Goldman Sachs Asset Management. Lindsay, thanks so much for joining us.
Thank you for having me. Okay. Rates have gone up a lot.
We've got an Iran conflict going on. What's the connection? What's happening?
Sure. So, what's happening with the Iran conflict has to do with an energy shock. I mean, it really is, besides from being a geopolitical situation, it is very much an inflation shock in the form of energy prices, specifically oil and gas.
So what's happening in the bond market is the bond market, particularly more in the front end than the back end, is thinking about what will central banks do next? And how will they respond? And so what we've seen in the bond market is what we call a bear flattening price is lower, and actually we've seen the curve flatten, meaning the yields in the front end are actually going up more than what's in the back end.
Why is that happening? Because in many instances, the pricing of what the central banks' next move has gone from pricing in cuts to actually pricing in hikes. And that's because central banks have to think about inflation.
And in the US, we've got a dual mandate, right? It's inflation. It's labor market.
The rest of the world really focuses on one thing, and that's price stability. So they care about inflation. All right.
Well, let's cut to the US then, to go to the Fed. What are they going to do? So, we still feel that the modal case is that they will cut two times this year.
Now, what the market's been saying so we're a little bit out of consensus the market has priced out those two cuts and is saying that the Fed is on hold for the rest of 2026.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- bond yields
- interest rates
- rate overreaction
- fixed income investing
- investment opportunities
Companies and tickers mentioned
- Goldman Sachs Asset Management
Watch the episode
Watch ““I’d Rather Be a Bond”” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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