US Rates Weekly: Front-End Flatteners and Long-End Value

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US Rates Weekly: Front-End Flatteners and Long-End Value

Viewpoint |

26 Jun 2026 17:46:08 ET │ 37 pages

US Rates Weekly

Front-End Flatteners and Long-End Value

CITI'S TAKE

Jason Williams AC

We lean into our front-end flattener paired with a received July FOMC +1-212-723-1837

position ahead of next week’s NFP. Further out the curve, we remain jason1.williams@citi.com

constructive on duration, with our 10y view anchored by our expectation for

core CPI to fall into year-end. We revised our 10y forecast up marginally to Mike Chang AC

3.9% for YE26. Separately, we deep dive into the 20y bond and look at long- +1-212-816-8718

run fair value in spreads, where we are in 10s20s spreads curve steepeners. mike.chang@citi.com

Finally, we discuss tail risks to our long 5y spreads position.

Raghav Datla AC

+1-212-723-4813USTs — Fed custody holdings fell $139bn since the start of the Iran conflict and fell

raghavendra.varma.datla@citi.com

$80bn in March. We estimate that in March around $25bn of the decline were sales

of coupon USTs and that up to $20bn could have been the sales/redemptions of T- Alejandra Vazquez Plata AC

bills. Thus, the remainder may be a custodial shift. We walk through our +1-212-723-0486

decomposition as a follow-up to US Rates Strategy - Why are Fed custody holdings alejandra.vazquezplata@citi.com

of USTs declining? With thanks to

Simran Bedi

Short-end — Treasury announced yesterday the first round of T-bill auction size

increases, in line with our view. We expect to see further increases in sizes across

the T-bills curve in the coming weeks. We see scope for the imminent increase in T-

bill outstanding to push SOFR fixes higher through July and August, and we’re

getting short the SERFFQ6 contract. We also discuss Fed balance sheet