Global Rates & FX Watch: May FX rebalancing – From EM & USD into GBP, EUR & JPY

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Global Rates & FX Watch: May FX rebalancing – From EM & USD into GBP, EUR & JPY

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Global Rates & FX Watch

May FX rebalancing – From EM & USD into

GBP, EUR & JPY

Key takeaways 28 May 2026

Rates and FX Research• We estimate May month-end FX rebalancing needs based on a conventional 60/40

Global portfolio.

• Our estimates suggest outflows from EM & to a lesser extent USD vs inflows into Bruno Braizinha, CFA

GBP, EUR & JPY denominated assets Rates Strategist BofAS

• Bond returns dampen +ve equity impact but broad bias remains for inflows into CHF +1 646 743 7012 bruno.braizinha@bofa.com

Kamal Sharma

Estimates: from EM & USD to GBP, EUR & JPY FXMLIStrategist(UK)

We estimate FX rebalancing needs based on a conventional 60/40 portfolio of global +44 20 7996 4855 ksharma32@bofa.com

equities & bonds (framework applied below). Our estimates reflect broadly an

Adarsh Sinha

outperformance of EM denominated assets over May (and to a lesser extend USD FX and Rates Strategist

assets), and relative underperformance of GBP, EUR and JPY denominated assets (see MLI+44 (UK)20 7995 9745

Exhibit 1). adarsh.sinha@bofa.com

Marcus Boman

This underperformance implies scope for rebalancing flows out of EM (-0.9σ) + to lesser FX Strategist

extend USD (-0.2σ), and into GBP, EUR & JPY with Z-Scores c.+1.1σ, +0.9σ & +0.8σ, MLI+44 (UK)20 7996 3322

respectively – see Exhibit 2). marcus.boman@bofa.com

Global Rates & Currencies Research

Exhibit 1: Current weights in our conventional 60/40 portfolio… MLI (UK)

… and recent asset class performance See Team Page for List of Analysts

Asset Region Weights Performance

Equities 60%

US 34% 4.4%

Europe 9% 2.5%

Japan 4% 4.2%

UK 2% 0.2% Glossary:

China 4% -1.1%

EM – Emerging markets EM ex-China 7% 10.3%

Bonds 40% FI – Fixed income

US 16% 0.0%