Vanguard, Goldman Say Waning Reflation Bets No Barrier to Fed

For two of the biggest private holders of Treasuries, bond-market signals in the past week are nothing but noise when it comes to betting on the Federal Reserve.

Goldman Sachs Asset Management and Vanguard Group Inc., which oversee a combined $5 trillion, say they’re taking Fed officials’ word that they’re on track to raise rates next month. Holding to that conviction hasn’t been easy lately for money managers: Market-implied bets on a hike have been whipsawed by the political storm buffeting the White House, and breakeven inflation rates are near the lowest since November.

Those bond-market signals bear watching as investors assess the prospect of additional rate hikes beyond June. The odds of a rate boost next month have rebounded to about 70 percent, from 57 percent Wednesday, based on the current effective fed funds rate and the forward overnight index swap rate. While down from 80 percent last week,



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