Bank of America Securities: After tariff relief, adjustments to the outlook for the U.S. interest rate market

According to the Zhitong Finance APP, Bank of America Securities has released a research report stating that it maintains its interest rate forecast for 2025 unchanged. The recommendation for its interest rate curve strategy has been adjusted to "long-end flattening," with the bank recommending a "December 2025 vs December 2026" interest rate swap curve flattening trade (from a target of -34bps to -70bps). The bank maintains a slightly bullish allocation for the mid-duration (5Y), advocating for a gradual increase in duration at a more stable interest rate position, expecting the 10Y U.S. Treasury yield to stabilize in the range of 4.5-4.75%. The inflation trade is neutral, closing the 1-year inflation short position while retaining the 2y3y inflation long position, anticipating that medium-term inflation still has upward potential. Key Points from Bank of America Securities: After the easing of U.S.-China tariffs, Bank of America maintains its interest rate forecast for 2025 unchanged After the tariff reductions, the average U.S. tariff has decreased from over 20% to 12%, with inflation and stagflation risks declining, and core PCE expectations adjusted down from 3.5% at year-end to 3%. Therefore, Bank of America believes there is no need to adjust the current interest rate forecast, maintaining the 2-year Treasury yield at 3.75%, the 10-year at 4.5%, and the 30-year at 4.9% by the end of 2025. Interest rate curve strategy recommendation adjusted to "long-end flattening" With the likelihood of short-term rate cuts decreasing, Bank of America recommends a "December 2025 vs December 2026" interest rate swap curve flattening trade (from a target of -34bps to -70bps). Reasons include: (1) decreased pressure for rate cuts in 2025; (2) further decline in inflation in 2026; (3) potential strategy divergence under the new Federal Reserve leadership. Maintaining a slightly bullish allocation for mid-duration (5Y) Despite the market previously overestimating recession risks and underestimating hard data support, Bank of America still advocates for a gradual increase in duration at a more stable interest rate position, expecting the 10Y U.S. Treasury yield to stabilize in the range of 4.5-4.75%. Regarding spreads Neutral in the short term, bearish on the long-term 30-year spread: Due to fiscal deficits and U.S. Treasury supply pressures, Bank of America maintains a "short" recommendation on the 30-year spread. The short end (2-5Y) spread remains neutral to slightly bullish due to a stable short-term financing environment. Inflation trade is neutral Closing the 1-year inflation short position while retaining the 2y3y inflation long position, anticipating that medium-term inflation still has upward potential, especially more pronounced relative to the Eurozone. The volatility strategy leans towards short-term longs and long-term conditional steepening: recommending a 6-month "costless" 2s10s lower volatility trade, as well as a long-term "bear steepening" combination based on the 5s30s interest rate spread to address market repricing risks. ![](https://img.zhitongcaijing.com/image/20250516/1747361925590958.png? x-oss-process=image/format,jpg/quality,q_90)