Trading ideas and investment strategies discussed herein may give rise to significant risk and are not suitable for all investors. Investors should have experience in relevant markets and the financial resources to absorb any losses arising from applying these ideas or strategies. BofA Securities does and seeks to do business with issuers covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Refer to important disclosures on page 27 to 29. Analyst Certification on page 26. 12654240 Global Rates Weekly Confidence test The View: Markets lack conviction, yet not as much as central banks Central Banks this week flagged the need for greater confidence in the inflation outlook before they can embark in rate cuts. The market remains more sanguine, especially in light of nascent risks around US regional banks. We suggest a few money market trades. ─ S. Salim Rates: Confidence test US: Jan FOMC pushed out first cut & QT timing, but our core duration views hold. Quarterly refunding in line with expectations; hedge non-soft landing outcomes. EU: We enter new trades in the EUR front end, continue to monitor weekly supply pressures and discuss EGB ratings, with a bullish view in particular on Greek bonds. UK: Rates market chose to focus on the more dovish elements of the BoE MPC meeting; we see current pricing as a best-case scenario. AU & NZ: We recommend paying March 2024 OIS with 5bps of cuts priced and retain our recommendation for tighter swap spreads given heightened risk of RBA bond sales. JP: Hawkish January BoJ MPM heightened expectations for Mar/Apr policy change. Front end: Bill supply: higher w/ QT shift & refunding US: We revise higher our CY '24 bill supply estimates after Jan FOMC / QT shift & refunding. Inflation: Twin peaks UK: We commend MPC for its pushback against rate cut pricing, but the market found an excuse to ignore it. We add a forward real yield box trade on near record terms. Supply: November refunding US: Treasury surprised us with lower than expected long-end supply at the November refunding. Technicals: Shorts “hold” 10yr > 3.78% & stop if below Our Q1 bias for a partial reversal of Q4 was working up until this week. Tactical from here. Short while 10y yield is above 3.78% and stop or tactical long if below. ─ M. Cabana, M. Swiber, B. Braizinha, R. Axel, S. Salim, R. Man, E. Satko, A. Stengeryte, M. Capleton, R. Segura-Cayuela, A. Zhou, O. Levingston, M. Fuchila, T. Yamashita, S. Yamada, K. Craig, P. Ciana 02 February 2024 Rates Research Global Table of Contents Our medium term views 2 Our key forecasts 2 What we like right now 2 The View 3 Rates – US 4 Rates –...
