US Rates Watch: Spread hungry, UST light

Research evidence excerpt

US Rates Watch: Spread hungry, UST light

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US Rates Watch

Spread hungry, UST light

Flows say selloff, not capitulation 11 May 2026

Positioning and flow signals point to a market that remains lightly long duration but not

yet capitulated. Futures positioning suggests a bias toward higher rates, driven by a Rates Research

United Statesbuildup of out‑of‑the‑money longs alongside in‑the‑money shorts. Despite concerns

around JPY intervention, Fed balance‑sheet data show little evidence of meaningful

official UST sales in recent weeks so far, and front‑end spread widening is inconsistent MeghanRates StrategistSwiber, CFA

with market‑moving foreign liquidation. Pension flows remain notably subdued despite BofAS

meghan.swiber@bofa.com

strong funded status, while active funds continue to favor spread products over USTs.

Eleanor Xiao

Against this backdrop, overall fund inflows have accelerated—led by Agg funds and Rates Strategist

renewed demand for short‑term and inflation products. BofAS

eleanor.xiao@bofa.com

Exhibit 1: Curve-o-meter US Rates Research

BofAS

Rates to trade like positioning is modestly short & neutral curve

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CFTC: Commodities Futures Trading

Commission

CTA: Commodity Trading Adviser

FV: Treasury 5Y contract

ITM: In the Money

MBS: Mortgage Backed Securities

OTM: Out of the Money

US: Treasury 20Y contract.

Source: BofA Global Research, Note: dial shows duration = average 5y percentiles of CTA positioning + net OTM position implied from

futures positioning proxy + CFTC non-comm ex LF + fund regression duration beta. Curve = avg 5y percentiles of CTA betas + futures UST: Treasury Security

positioning proxy + fund regression curve beta

BofA GLOBAL RESEARCH SF: SOFR Futures