Oil vs. the economy

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Oil vs. the economy

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Situation Room

Credit Analysis

Oil vs. the economy 24 June 2026

The big drop in Treasury yields on Wednesday is concerning. IG spreads have clearly Credit Strategy

been sensitive to the level of yields so far in 2026 (Exhibit 1). Spreads benefitted from United States

the jump in yields on the back of Iran war. Today, spreads instead traded about 2bps Cross Product

wider as 10yr Treasury yield declined by 10bps, potentially due to lower oil prices. Yuri Seliger

Credit Strategist

It’s the economy BofAS+1 646 855 7209

Although oil certainly matters, yields have decoupled to the upside from the oil price so yuri.seliger@bofa.com

far in June (Exhibit 2). The reason is the US economy, which has remained surprisingly Sohyun Marie Lee

resilient despite the Iran oil price shock. Payrolls are re-accelerating (Exhibit 3) and core CreditBofAS Strategist

PCE inflation has now reached 2023 levels, with our economists tracking 3.4% YoY for +1 646 855 7217

sohyun.lee@bofa.com

May (Exhibit 4).

The strong economy and the elevated inflation should keep rates from rallying too much,

In this reportwhich should be supportive for spreads. Our economists are now calling for three Fed

rate hikes in 2026 (see Federal Reserve Watch: Change of call: Fed to hike 75bp this Daily supply snapshot

year), while markets are pricing 1.5 hikes by January 2027.

Daily dealer inventories update

July 2026 US IG cash index roll

Daily HG fund flows

We provide a preliminary estimate of the July 2026 US IG corporate cash index roll with

aggregate numbers and individual bond additions and removals for the ICE BofA index. Daily foreign demand tracker

Exhibit 1: IG spreads are sensitive to yields