US Rates Weekly: Red card for rate hikes

Research evidence excerpt

US Rates Weekly: Red card for rate hikes

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10 Jul 2026 18:20:24 ET │ 34 pages

US Rates Weekly

Red card for rate hikes

CITI'S TAKE

Jason Williams AC

We remain received in the July FOMC meeting with a front-end flattener +1-212-723-1837

hedge as next week’s CPI should be supportive, combined with our view on jason1.williams@citi.com

seasonal NFP weakness. This backdrop implies 5s30s steepening risks,

combined with our view that pension fund demand may remain weak until Mike Chang AC

a move towards 5.2% to 5.3% in 30s. We also discuss what a lack of forward +1-212-816-8718

guidance will do to rates pricing. We like fading FOMC premium, in near- mike.chang@citi.com

term forwards, in exchange for getting long vol into data prints. Finally, we

remain in carry trades such as long belly spreads and continue to like Raghav Datla AC

receiving 10s against the wings, which has been well correlated to short-vol +1-212-723-4813

positions. raghavendra.varma.datla@citi.com

Alejandra Vazquez Plata AC

Short-end — Despite this week’s soft SOFR prints, we think that growing T-bill +1-212-723-0486

settlements in the second half of July could push SOFR fixes higher from here, and alejandra.vazquezplata@citi.com

we continue to like being short the Aug-26 SOFR/FF basis. A risk to our view could

With thanks tobe additional tariff refunds, which would push the TGA balance lower and reserves

Simran Bedihigher, but we think the bulk of the refunds have been paid out for now. We also

discuss our thoughts on Chair Warsh’s recent remarks and the balance sheet task

force.

Inflation — We highlight the downside risks for June CPI and remain in our short

December fixings trade to position for it. As hawkish Fed risks decline and risk