US Fixed Income Strategy: The US Fixed Income Weekly

Research evidence excerpt

US Fixed Income Strategy: The US Fixed Income Weekly

US Fixed Income Mid-Year Update &

Outlook Virtual Conference 2026

Opening remarks – Chris Flanagan

The remarks frame BofA’s 2026 Fixed Income Mid-Year Outlook around a higher-for-

longer rates regime, resilient nominal growth, sticky inflation, and a wealth-driven cycle

that continues to support risk assets and fixed income demand. The core view is

underweight duration and neutral-to-overweight spread sectors, with returns driven

more by carry, curve positioning, quality selection, and structural protections than broad

beta. BofA expects the 2-year and 10-year Treasury yields to end the year near 4.5%,

with the curve flattening toward zero but not sustaining inversion. Strong US household

wealth creation is the key anchor, helping absorb heavy bond supply and supporting

tight spreads despite robust issuance. Credit remains constructive but increasingly

selective; securitized products offer attractive carry, especially higher-quality floaters;

munis provide high-quality duration; and EM faces pressure from stronger dollar and

higher rates. Geopolitical and systemic risks may trigger drawdowns, but dips should be

bought if liquidity holds

Technical Strategy –Paul Ciana

Paul Ciana frames the macro outlook through a technical lens, emphasizing that the 10-

year Treasury yield remains trapped in a frustrating two-year range. A sustained move

above roughly 4.6% would keep the upside breakout thesis alive, potentially toward 5%

or higher, while a break below about 4.2% would weaken that case and suggest

downside risk. The 2s10s curve has shifted from a prior steepening trend to a flattening

bias, with risk of moving toward roughly 5bp. In FX, Ciana sees the dollar breaking