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BofA: Confidence Building For Duration Longs, Recommend Long 5s

US TSYS

Bank of America note that “in mid-February we stressed “patience on adding duration until 10y UST 4.50%+ & total Fed cuts over the cycle closer to 150bp or less.” We are now at levels where we believe investors can more confidently add duration exposure and recommend going long 5-Year Tsys at 4.62% targeting 4.00%, with a stop set at 5.10%.”

  • “Factors that make us more comfortable leaning long in the current environment: (1) The Fed is unlikely to hike again unless inflation expectations meaningfully rise (2) risk assets show increased sensitivity to rate moves (3) asset manager positioning is cleaner vs Q323.”
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Bank of America note that “in mid-February we stressed “patience on adding duration until 10y UST 4.50%+ & total Fed cuts over the cycle closer to 150bp or less.” We are now at levels where we believe investors can more confidently add duration exposure and recommend going long 5-Year Tsys at 4.62% targeting 4.00%, with a stop set at 5.10%.”

  • “Factors that make us more comfortable leaning long in the current environment: (1) The Fed is unlikely to hike again unless inflation expectations meaningfully rise (2) risk assets show increased sensitivity to rate moves (3) asset manager positioning is cleaner vs Q323.”