The Fixed Income Digest: The hotter, faster future: put to the test

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The Fixed Income Digest: The hotter, faster future: put to the test

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The Fixed Income Digest

The hotter, faster future: put to the test

Reacceleration: shades of ’22, but not a repeat 11 June 2026

The macro is moving beyond simple higher-for-longer into a reacceleration phase, with United States

strong labor, resilient consumption, and AI capex reinforcing nominal growth. That

Chris Flanagan

growth is feeding back into AI investment and household wealth—on the order of $15tn FI/MBS/CLO Strategist

annually—supporting consumption and helping markets absorb roughly $3tn of net BofAS +1 646 855 6119

issuance across Treasuries, corporates, and securitized products in 2026 without christopher.flanagan@bofa.com

meaningful spread widening. Inflation still shows shades of 2022, but softer demand Alvin Fung

should limit the scale of any renewed wave, keeping the Fed cautious and the bar for ABS Strategist BofAS

cuts elevated. +1 646 855-9091

alvin.fung@bofa.com

Rates do the work: higher-for-longer… and still hinger

Rates remain the main adjustment mechanism. Fewer cuts and a hawkish tilt have

pushed yields back toward the top of the range, with a front-end-led flattening bias and

elevated real yields. Treasuries and agency MBS have lagged, confirming that the

adjustment is occurring through yields rather than spreads, while duration remains

challenged, especially in the front end. Exhibit 1: Total returns since April 30 and

2026 YTD

Yes on anchored spreads; increasingly selective on returns Nasdaq 100 leads total returns as of

6/10/2026Credit spreads remain stable, supported by growth and income demand, but returns are

becoming more selective. Investment grade spreads sit near tights and can grind tighter Total