A tale of two tails

Research evidence excerpt

A tale of two tails

FICC Research

Interest Rates

2 July 2026

United States: Interest Rates

30y yields have drifted back to 5% as the economy remains

resilient, with tightening labor markets and elevated inflation

despite a high policy rate. In addition, forces driving the term Anshul Pradhan +1 212 412 3681

premium higher are structural, with the supply glut getting anshul.pradhan@barclays.com

worse. We maintain our view to pay 5y5y rates. BCI, US

Demi Hu, CFA

+1 212 526 7398

The global yield curve steepened over the week, amid an ongoing decline in oil prices, a softer- demi.hu@barclays.com

than-expected payroll report in the US and somewhat less hawkish commentary from central BCI, US

bankers. Figure 1 shows that US 2y yields were unchanged to a touch lower, whereas 30y yields

Apostolos Apostolou

rose 12bp. Figure 2 shows that real yields and breakevens rose a touch over the week. The price +1 212 526 5051

action was similar across bond markets, with 30y JGBs selling off almost 20bp amid further apostolos.apostolou@barclays.com

concern about fiscal expansion (see here). Equities rose over the week and VIX fell to just 16, BCI, US

suggesting investors remain optimistic about the economic outlook.

We have been recommending paying 5y5y SOFR, as we believe the expectations and term

premium components in far forward rates have room to move higher. We maintain that view. On

the former, the economy remains resilient, despite a high policy rate, suggesting market's view

on the neutral rate is too conservative. On the latter, Figure 3 shows that US fixed income supply

is set to rise sharply this year, which should put upward pressure on the term premium. We

expect gross issuance of more than $10trn this year, 8% higher than last year, led by corporate

bonds (see here).