Goldman Sachs strategists say the recent selloff in US insurance bonds is overblown, driven more by headlines than fundamentals. Concerns over insurers' exposure to private credit have pushed yield premiums wider, with life insurers' bonds trading at their highest spreads since May. Spencer Rogers and his team at Goldman found that the median allocation to alternative assets among life insurers is just 6%, far below market fears.

Worries about AI disruption to software firms and increased ties between insurers and private credit managers have fueled the selloff. US high-grade spreads have widened as investors fret over opaque investments and potential systemic risks. However, Goldman's analysis suggests these concerns may be exaggerated, with disclosures indicating that insurers' private securities are more akin to broadly distributed corporate debt than hard-to-price instruments.

The strategists argue that the recent market moves are more headline-driven than fundamental, with average yield premiums on life insurer notes now 45 basis points wider than broad US corporate investment-grade bonds. They maintain that current fundamentals don't warrant continued sharp repricing of the sector, suggesting the selloff may have run its course.