Fingers crossed

Research evidence excerpt

Fingers crossed

FICC Research

Interest Rates

9 July 2026

United States: Interest Rates

US rates are again showing heightened sensitivity to

developments in Iran, likely reflecting the Fed policy

outlook's high dependency on the inflation outlook. While Anshul Pradhan +1 212 412 3681

pricing of hikes is likely to remain sticky, we believe paying anshul.pradhan@barclays.com

5y5y offers better risk-reward given economic resilience. BCI, US

Demi Hu, CFA

+1 212 526 7398

We appreciate your 5-star vote in 2026 Extel Global Fixed-Income Research Survey in the USA: demi.hu@barclays.com

Economics & Strategy: U.S. Rates Strategy category. BCI, US

Global bond markets sold off amid renewed concerns about a potential end to the Iran war

ceasefire, with Brent briefly touching $80/bbl. Figure 1 shows that yields rose across major

developed markets, with the US outperforming on the margin. US 2y yields rose 4bp, though in

the UK and Germany they rose about 15bp. Inflation breakevens widened sharply in Europe,

driving the underperformance of Bunds (Figure 2). 30y JGBs were unchanged but only after

recovering from a sharp sell-off.

Year-to-date, 30y yields have risen globally, with JGBs leading the way, followed by the UK and

US (Figure 3). As we have argued here, reflecting persistent fiscal deficits alongside a price-

sensitive buyer base, the balance of risk has shifted from a global savings glut to a bond glut,

pointing to structurally higher long-term yields. In the US, as we have argued here, we see

additional pressure from the Fed's balance sheet review which is likely to retain the ample-

reserves regime but accelerate the reduction in portfolio duration. We believe that the Fed's

Treasury portfolio is significantly suppressing term premium, to the tune of 60bp or so, but how