Macro Risk Digest: The rates redress

Research evidence excerpt

Macro Risk Digest: The rates redress

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Macro Risk Digest

The rates redress

Key takeaways 18 May 2026

Rates and Currencies Research• Rates repricing continues to dominate markets & we push back timing of Fed rate

Global

cuts. Opportunity to switch debt liabilities.

• In US switch to pay fix/receive floating as data strong. In UK, rate overshoot argues Kamal Sharma

FX Strategist

case for pay floating/receive fix MLI (UK)

+44 20 7996 4855

• Longer dated GBP forwards increasingly attractive to hedge for GBP functional ksharma32@bofa.com

corporates Ralph Axel

Rates Strategist

BofAS

Key themes for corporates +1ralph.axel@bofa.com646 743 7011

1) Fed on hold: Against the backdrop of strong US economic data, we have pushed Ronald Man

back the timing of Fed rate cuts into 2027. Metrics of financial conditions all point Rates Strategist MLI (UK)

to a stance of policy that is arguably more easy than tight, and as inflation climbs, +44 20 7995 1143

the real stance automatically eases. Despite this, Fed pricing remains the outlier, ronald.man@bofa.com

with less rate hikes priced in than other DM central banks (BoE & ECB pricing 3 John Shin FX Strategist

hikes this year). Fed may have little alternative but to recognise strength in data as BofAS

a high bar to rate cuts allowing Fed repricing to more hikes. +1joong.s.shin@bofa.com646 855 2582

Outlook: Corporates should look to switch liabilities to pay fixed/receive floating. AdarshFX and RatesSinhaStrategist

MLI (UK)

2) UK Political woes: Political uncertainty has returned to haunt UK markets with +44 20 7995 9745

adarsh.sinha@bofa.com

sizeable repricing of GBP risk. Events have moved fast in a short period of time and

a leadership contest only appears to be a matter of time.