US Rates Watch: Monthly rates models: July ’26 edition

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US Rates Watch: Monthly rates models: July ’26 edition

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US Rates Watch

Monthly rates models: July ’26 edition

Rates models update – US reflation theme stalls 06 July 2026

Both macro & market data suggest stalling of the reflation theme over the past month. Rates Research

As the fog of war fades and market looks for signal vs noise, US rates (nominal & real) United States

still trade cheap vs fundamentals (Exhibit 1 & Exhibit 4), but less rich vs global yields.

Positioning gauges show downgrade of risk backdrop (e.g. Exhibit 24 & Exhibit 27) over

Bruno Braizinha, CFA

the past month. Curve dynamic starts to suggest a trend shift from bear flattening to Rates Strategist

bull steepening (Exhibit 8) but: (1) under low levels of macro conviction (Exhibit 14) and BofASbruno.braizinha@bofa.com

(2) tail likelihoods still biased towards reflation (Exhibit 30) = back to mixed signals. Katie Craig

Short vol bias persists = long carry bias. Rates Strategist

BofAS

Duration and curve – signal vs noise? katie.craig@bofa.com

10yT FV c.4.15-4.35% vs macro (unch. over past month– Exhibit 1) and c.4.9% vs global

yields (c.10-15bp lower over past month – Exhibit 29). Dynamic of macro factors Glossary

suggest stalling reflation theme (Broad Macro -0.18σ, Growth -0.01σ, Inflation -0.41σ 10yT – 10-year Treasury

and Employment -0.02σ – Exhibit 3). USTs outperformed macro marginally over past 4w, BE – Breakeven inflation

underperformed over past 8-12w consistent with stalling reflation. Frontend still cheap c. – circa = approximately

by > 1.6σ (Exhibit 13) and balance of risks expressed on the curve dynamic skewed to Corp – Corporate

the upside (Exhibit 30), but market now closer to soft landing baseline (Exhibit 7). DM – Developed Markets

EFFR – Effective Federal Funds Rate