The US Fixed Income Weekly

US Fixed Income Strategy The US Fixed Income Weekly

Economics – July FOMC preview: It’s Warsh’s call 27 July 2026

Rising oil prices has made the July Fed decision a close call. We expect a hold, but Warsh Fixed Income Strategy has enough votes either way. We forecast -0.05% & 0.16% for Jun headline & core PCE. United States Soft headline inflation should support robust real spending growth. We expect 2Q GDP Cross Product growth of 1.7% q/q saar but consumer spending should rebound to a robust 2.5%. Fixed Income Research Rates – July limbo dance BofAS Chris Flanagan July hike uncertainty is highly unusual, we have greater conviction on degree of hikes FI/MBS/CLO Strategist getting priced further; stay paid 2y rates. A hawkish Fed, heavy IG supply, and investors BofAS with room to cut duration and credit risk all argue for higher yields.

The Flow Show – Bonds bringing the heat Mark Cabana, CFA Rates Strategist FCI hotter than EPS this summer...risk-off & long US$ until Fed hikes. Blue collar semis BofAS say long defensives, dividends, duration, short banks, brokers, tech, industrials.

Securitized Products –Defensive Carry Now, Duration Later Neha Khoda Credit Strategist On deteriorating geopolitics, seasonal risk weakness may be starting as HY and Agency BofAS MBS spreads widen. Stay defensive with high-quality floaters (CLO, SASB, CMO) and ABS while oil and rate volatility pressures build. A bond rally may emerge later if higher Alvin Fung rates ultimately slow growth and risk appetite; for now, keep duration short ABS Strategist BofAS Investment Grade – Hedge the Iran risks Brent oil back near the $100/bbl level suggests the risk of an escalation in Iran have See Team Page for List of Analysts increased materially. The earlier widening in IG cyclical sectors has by now fully re- traced. That suggests hedging Iran risks is cheap. Long US and Energy over European Table of Contents Yankees, underweight the cyclical Leisure, Yankee banks, Transportation, Autos. The CIO Summary 2 High Yield – The Credit race tightens: HY, Loans > IG, PC Economics 17 Rates 18 LevFin remains resilient as supportive technicals offset macro headwinds & growing AI- Front end 19 related supply. HY is expected to outperform while loans and private credit face more Technicals 20 headwinds & higher credit risk. In optimistic scenario, productivity gains & real growth Securitized Products 21 could broaden the credit rally benefitting Loans. Agency MBS 22 Non-agency MBS 23 Municipals – Reading the muni tea leaves CMBS 24 The 10s30s Treasury slope remained well under 60bp; 10s30s muni AAA flattening ABS 27 continued amid oil-driven rising yields. Negative muni new money issuance growth and CLOs 26 Investment Grade Credit 27 flat population growth hint at more economic imbalance than labor market suggests. High Yield Credit 28 Municipals 29 The Flow Show 30 Forecasts 31

See additional abbreviations on page 24

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The CIO Summary Chris Flanagan BofAS

The market backdrop has shifted meaningfully over the past several weeks. Rising oil prices, heightened geopolitical tensions in the Middle East, and renewed concerns about inflation persistence have pushed investors to reprice the path of monetary policy. While economic growth remains resilient, labor markets are stable, and risk assets continue to benefit from strong liquidity and AI-related investment, markets…