Goldman Sachs' chief strategist is optimistic about five-year Treasury bonds and expects the Federal Reserve to cut interest rates by 25 basis points in September.

Josh Shiffrin, Goldman Sachs' Chief Strategist for Global Banking and Markets, said that with the Federal Reserve almost certain to cut interest rates in September, five-year Treasury bonds are his "favorite trade." He noted that the current yield of five-year Treasury bonds in the 3% to 4% range not only offers attractive valuations but also offers protection against weakening risk markets. As of August 19, the five-year Treasury yield was 3.85%, a significant drop from the beginning of the year, reflecting market expectations for looser policy. Shiffrin predicts that the Federal Reserve will cut interest rates by 25 basis points at its meeting next month, potentially initiating an easing cycle that could last until 2026.