VIEW: Wednesday saw BofAML write "U.S.......>

US TSYS: VIEW: Wednesday saw BofAML write "U.S. fundamentals still justify

higher yields with 10y fair value ~2.7%. However, we see global risks around

trade & increased political uncertainty on the horizon which causes us to revise

our 10y forecast to 2.6% by end '19. The most favorable trade outcome is a near

term deal, but risks of continued brinkmanship continue to rise. We still favour

curve steepeners with 2s10s likely in a 10-40bp range, consistent with a Fed on

hold. We also like carry efficient proxies for steepeners like 1y fwd 2s10s30s

fly. In trade war escalation, price action is likely dominated by risk-off moves

leaving the front end vulnerable. In the case of a trade resolution, the curve

should also steepen with a major risk event out of the way & focus turning to

the economy. We also recommend steepeners on the 2s10s real curve, which

currently appears too flat & could see additional benefit from higher 2y

inflation on a pricing in of tariffs. Trade war developments pose mostly

downside risks to swap spds across the curve. We hold a short spread position in

the 5y sector, which should benefit from either FX-related Tsy selling or

convexity receiving if rates decline."