Global rates: spot the differences

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Liquid Insight

Global rates: spot the differences

03 August 2026

Key takeaways

Rates markets price near-identical tightening (around 60bp by mid-'27) across US,

EUR, GBP, JPY, CAD despite macro divergence

10s30s curves move in near-lockstep: EUR and UK betas near 1 vs US; two PCA

factors explain >95% of curve moves since 2022

We fade the alignment w/ long UK vs EUR in H7, & staying short US 2y vs AU & CA; in

curves: we favor steepeners in UK & CA

By Sphia Salim

Chart of the day: Spot the odd one out: AU only market not pricing c.60bp of hikes by Jun-27

Market implied cumulative central bank hikes by mid 2027 across regions, bps

100

Rates and Currencies Research

Global

Global Rates & Currencies Research

MLI (UK)

Sphia Salim

Rates Strategist

MLI (UK)

Oliver Levingston

FX and Rates Strategist

Merrill Lynch (Hong Kong)

See Team Page for List of Analysts

75

Liquid Insight

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EUR

GBP

JPY

CAD

USD

AUD

Source: Bloomberg, BofA Global Research. Data as of 31-Jul

BofA GLOBAL RESEARCH

DM rate expectations look alike; we uncover differences

Rates markets have converged on a strikingly uniform tightening path — around 60bp of

hikes priced by mid-2027 across the US, euro area, UK, Japan and Canada — with

Australia the lone dissenter at around 20bp (Chart of the Day). That resemblance stands

out against clear macro differentials (and thus our CB forecasts), and it isn't confined to

the front end. In curves, levels may be different across regions, but dynamics resemble

each other. 10s30s curves have been moving almost in lockstep in US, EUR and UK. The

two PCA factors of global curves explain >95% of moves since 2022.

We lay out where to fade resemblances in the front end, based on where differences sit

vs our economists’ baselines (US vs AU & CA) and where differentials can build (EUR vs

UK). Further out, given the focus on risks of renewed global steepening driven by the US,

we look at what global dynamics imply as fair value for the different curves, and at the

carry & roll across regions. Those comfort us in our 2s10s steepener views in UK and CA.

…