Benign hikes

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Benign hikes

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IG Credit Strategist

Benign hikes 26 June 2026

Treasury yields have decoupled from the declining oil prices due to the hawkish Fed Credit Strategy

outlook. Our economists and strategists are now calling for three Fed hikes in 2026, a United States

flatter Treasury yield curve and the 10yr near 4.5% for the remainder of 2026 (see

Global Rates Viewpoint: Mid-Year: It’s a small world after oil).

Such stable and elevated yields should continue to support the very strong investor

demand we have seen so far in 2026. The elevated economic growth in nominal terms is

also good for credit fundamentals. The risk is that we don’t get the hikes and yields go

lower, but even in that scenario of moderately lower yields IG spreads need not go much Yuri Seliger

wider. Credit Strategist BofAS

+1 646 855 7209

One clear implication of the Fed hiking cycle is a steeper IG spread curve on more yuri.seliger@bofa.com

attractive yields in the front end. The front-end spreads are already relatively cheap, so a Sohyun Marie Lee

hiking cycle should be the catalyst for the front-end outperformance. CreditBofAS Strategist

+1 646 855 7217

Cheap 10yr spreads sohyun.lee@bofa.com

While the IG index spread has remained relatively stable, on the curve 10yr maturity has See Team Page for List of Analysts

underperformed by about 3 to 4bps. The Treasury yield curve has flattened, but back-end

spreads have remained anchored by the yield-sensitive demand. Inside we screen for

5s10s spread curves that have steepened the most so far in June.

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