BofA Global Rates Weekly License to steepen 2026 10 09

Global Rates Weekly License to steepen

09 October 2026 The View: Stronger, higher, steeper Next week will be mostly about US data, and whether CPI moves the dial for the Oct Rates Research FOMC meeting. Absent a hawkish Fed, improved growth drives global curve steepening. Global

Rates: Bond can spook Fed into Oct hike Core views, trades and forecasts 2

US: Markets underprice Oct hike risk; firm CPI/growth could force Fed to hike vs tolerate The View 3 a bond selloff. Treasury survey is a key long-end risk event, potential supply cuts. Rates – US 4 Rates – EU 6 EU: Global curves are increasingly moving together. A more hawkish fed would help limit Rates – UK 8 the global steepening, until data weakens or DMOs become more activist. Valuations Rates – AU 10 suggest more steepening potential in EUR than in US for 10s30s. Front end – US 11 UK: We expect a funding need increase of £10bn on 28 Oct, with this met by extra T-bill Inflation – UK 13 sales, and shorter WAM via within-remit adjustment to the maturity mix. Spreads – EU 15 Volatility - EU 17 AU: Retain our pay Nov RBA OIS ahead of RBA minutes and Sep jobs print given Nov Technicals 19 hike is close call. We close our 2y 6s3s trade. Special Topic 20 ─ M. Cabana, M. Swiber, B. Braizinha, R. Axel, K. Craig, E. Xiao, S. Salim, N. Thomas, Rates Alpha trade recommendations 21 E. Davidsson, A. Stengeryte, M. Capleton, O. Levingston, I. Hartstein Global rates forecasts 25 Appendix: Common acronyms 26 Front end: Fed reserve regime Qs Research Analysts 31 US: US lending stigma > RoW. To lower stigma: (1) remove weekly H41 reserve distribution data (2) allow Fed lending in liquidity stress tests. Global Rates Research ─ M. Cabana, K. Craig MLI (UK) Ralf Preusser, CFA Spreads: EU rating and valuation Rates Strategist MLI (UK) EU: EU rating not automatically linked to France - the rating rests on AAA-AA+ rated EU member support. EU screens cheap on beta-weighted flies vs GE & periphery in 5-10y. Mark Cabana, CFA Rates Strategist BofAS ─ S. Salim, N. Thomas Sphia Salim Volatility: EU vol-au vent Rates Strategist MLI (UK) EU: EU vol surged over the past quarter as markets repriced ECB, fiscal and duration risks. We favor short 3m2y EU vs US vol and EU receiver calendars. See Team Page for List of Analysts

Technicals: US 10Y yield tactical peak favors a pullback The tactical peak risk flagged in mid-Sept is materializing—protect shorts for a pullback toward 5%. Once yield and momentum revert, pay again for uptrend resumption.

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 28 to 30. Analyst Certification on page 27.

Core views, trades and forecasts Exhibit 1: Global rates trade quilt Views / trades in bold when changed / entered this week US EU UK CA JP AU Pay Oct FOMC OIS Bearish front-end bias Duration Bullish front-end bias Bullish front-end bias Long bias vs US Pay Nov RBA OIS Short 2y UST Bullish long-end bias Long 20y UST fly 2s10s flattener in options Curve 15y-20y flattener Flattening bias 2s10s flattener in options 2s10s flattener 2s30s flattener Steepening bias in 10s30s Long Dec26 SOFR/FF CORRA cheaper vs deposit Bases Sonia cheaper vs. Bank TONA below IOER Long M7 3m SOFR/FF rate Short 10y5y RPI vs US Real yield curve flattener 1y fwd 2s10s real steepener Inflation Receive UKTi 35s-38s Long 10y20y infl. swap BTPei 2041/56 sprd narrower fwd real yield Long 2y ASW Long low cpn 2y & 7y Gilts on Short front-end spreads Spreads Bearish bias in 5-10y Long 30Y ASW Tighter ACGB ASW bias Long 30y ASW Z-spread vs US Long fwd vol Vol higher YE26, lower in ’27 Vol supported Vol supported near term Vol…