US Rates Watch: Wind beneath higher yields

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US Rates Watch

Wind beneath higher yields

Yields take flight

Positioning continues to point to higher yields. Futures positioning remains skewed

toward shorts, while recent asset manager long additions have likely come under

pressure. Chair Warsh's second Fed meeting pushed trend followers to extend shorts at

the long end, a dynamic that could persist into next week (see report: Systematic

monitor). Front-end positioning is likely already near max-short levels, making further

moves more dependent on volatility than outright positioning.

Flows paint a mixed but still bearish picture. Bond fund demand softened sharply last

week, with long-term Treasury funds seeing outflows and mixed-allocation fund inflows

slowing notably. At the same time, higher yields appear to be attracting some buyers

back into the market, as evidenced by a rebound in custody holdings and active funds

reducing duration underweights. Intervention-related selling remains an additional risk;

the broader demand backdrop remains consistent with a higher-rates bias.

Without a meaningful flip in momentum driving CTA covering, the flows and positioning

landscape largely supports our core views. We remain paid front-end rates and see scope

for inflation risk premium to build. While last week’s FOMC meeting saw an exceptional

markets response, periods that follow FOMC meetings with similar asset performance

mix see further long end pressures (see report: Trading Fed “street cred.”)

Exhibit 1: Curve-o-meter

Rates to trade like positioning is only modestly short with longs out of the money and modestly in a

flattener

02 August 2026

Rates Research

United States

Meghan Swiber, CFA

Rates Strategist

BofAS

Eleanor Xiao

Rates Strategist

BofAS

US Rates Research

BofAS

See Team Page for List of Analysts

CFTC: Commodities Futures Trading

Commission

CTA: Commodity Trading Adviser

FV: Treasury 5Y contract

ITM: In the Money

MBS: Mortgage Backed Securities

OTM: Out of the Money

US: Treasury 20Y contract.

UST: Treasury Security

SF: SOFR Futures

TY: Treasury 10Y contract

TIC: Treasury International Capital

WN = Treasury 30Y contract

…