Liquid Insight: Fed hawkish, stay paid US 2Y

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Liquid Insight: Fed hawkish, stay paid US 2Y

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Liquid Insight

Fed hawkish, stay paid US 2Y

Key takeaways 22 June 2026

Rates and Currencies Research• Fed hawkish shift reinforces our core US rate views: pay 2Y, 2s10s flatteners, short

Global USTs vs global rates

• Lower oil will not see US rates decline as much as RoW b/c stronger data & less

macro commodity sensitivity GlobalMLI (UK)Rates & Currencies Research

• US 2s10s curve biased flatter & could invert; curve inversions don't always mean Mark Cabana, CFA

recession but they do mean restrictive Fed Rates Strategist BofAS

+1 646 743 7013

mark.cabana@bofa.com

By M. Cabana, M. Swiber, R. Axel, & E. Xiao Meghan Swiber, CFA

Exhibit 1: Taylor rule & Fed target (%) RatesBofASStrategist

Taylor rule is running well above Fed target; Fed end ’26 medians in Taylor = 5% FF +1 646 743 7020

meghan.swiber@bofa.com

Fed Target Taylor Rule Ralph Axel 10

Rates Strategist

BofAS

+1 646 743 7011

ralph.axel@bofa.com

5 Eleanor Xiao

+1 646 556 2987

0 eleanor.xiao@bofa.com

Oliver Levingston

FX and Rates Strategist

Merrill Lynch (Hong Kong)

oliver.levingston@bofa.com

-5

2000 2005 2010 2015 2020 2025 See Team Page for List of Analysts

Source: Bloomberg, Federal Reserve; diamond = Fed end ’26 median values in standard Taylor rule

BofA GLOBAL RESEARCH

Task force hawkish Recent Publications

US data has been strong & the Fed turned hawkish. Fed Chair Warsh acknowledged US

monetary policy is not restrictive (ex housing) & halfFed dots see hikes. Standard Taylor 18-Jun-26 Bearish EUR views from

rule suggests using Fed median projections by end ’26 = 5% (Exhibit 1). It increasingly across the pond

seems like Fed hikes are a question of when, not if. Consistent with this, our US Econ 17-Jun-26 BoE Preview: Ready, steady…