UBS projects the Federal Reserve will pause rate hikes through end-2026, leading to lower yields. Strategists recommend 2s/10s curve steepeners and 5-year TIPS longs.
Key Takeaways
- 1.The Fed is expected to remain on hold through 2026 before resuming rate cuts in March 2027.
- 2.Treasury yield curve appears too flat; recommended strategy is to add 2s/10s curve steepeners.
- 3.5-year TIPS are recommended for long exposure due to attractive risk-reward in real yields.
Table of Contents
- Regime change, or overshoot?
- Macro outlook summary
- US rates market outlook
- Inflation market outlook
- Appendix
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Authors
Phoebe WhiteReinout De BockMustafa Oguz Caylan
Securities
2-year US Treasury10-year US Treasury
Themes
AI Productivity GainsFed Policy PauseTreasury Issuance
Regions
North AmericaUnited StatesJapanUK