US Fixed Income Strategy: The US Fixed Income Weekly

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US Fixed Income Strategy: The US Fixed Income Weekly

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US Fixed Income Strategy

The US Fixed Income Weekly

Economics – Stagflation or reflation? 18 May 2026

The market narrative has shifted to reflation on strong inflation, spending and earnings. Fixed Income Strategy

but moderate stagflation risks remain as fiscal support fades. The April FOMC minutes United States

should reinforce the Fed's recent hawkishness. Cross Product

US Rates – Hike risk underpriced following inflation beats Fixed Income Research

Inflation beats & higher oil point to underpriced hike risk; positioning is a headwind; we BofAS

recommend 2y short and 2y5y flattener. Last week's decline in custodial holdings may Chris Flanagan FI/MBS/CLO Strategist

reflect JPY-driven UST sales, but a larger (~$100bn) intervention selling flow could weigh BofAS

on front-end spreads. +1christopher.flanagan@bofa.com646 855 6119

The Flow Show – The Bidterms MarkRates StrategistCabana, CFA

No Fed threat why stocks and commodities bid into midterms. CPI inflation above 4% is BofAS

+1 646 743 7013

when Wall St gets very twitchy. Chips & commodity bubbles genesis for great bull in mark.cabana@bofa.com

consumer stocks. Neha Khoda

Credit Strategist

BofASSecuritized Products – Breakout in yields, spreads remain +1 646 855 9656

calm neha.khoda@bofa.com

Hot economy = 10y breakout: 10y surges to 4.6%, confirming a breakout towards Alvin Fung

ABS Strategist

4.55%–4.75% range. Credit, ABS, CMBS, MBS spreads reasonably stable into rate spike: BofAS

consistent with overweight spreads, underweight duration. MBS stability reinforces carry +1alvin.fung@bofa.com646 855-9091

tilt but we downgrade to neutral. Meanwhile, BB CLOs lead weekly, Q2 returns. See Team Page for List of Analysts