Supply and demand in US bond markets
At a Glance
The desk interprets the current dynamics in the US bond market as indicative of strong demand amid robust supply, particularly driven by domestic investors' appetite for longer-duration Treasuries. Per the full note source, this trend is supported by attractive yields and a reduction in risk delivery from the US Treasury, which has created a conducive environment for credit absorption. Our analysis aligns with the broader market sentiment, as we see consensus targets reflecting a stable outlook for US yields. However, the absence of high-impact events on the calendar suggests a quieter trading environment ahead.
Key Takeaways
- 01Credit supply has been well absorbed, helped by reduced Treasury risk delivery and robust inflows.
- 02Investor appetite is growing for extending along the UST curve, particularly among domestic investors.
- 03Attractive yields and lower rate volatility are supporting inflows into bond markets.
Full Analysis
What the desk is arguing
BofA Global Research highlights that credit markets have absorbed strong supply effectively, supported by a significant reduction in risk delivery from the US Treasury to the private sector. Inflows remain robust due to attractive yields and recently lower rate volatility. Additionally, there is a growing appetite among domestic investors to extend duration along the UST curve.
Where it sits in our coverage
Our internal coverage does not include specific targets or spread data for this market view, as the commentary focuses on supply-demand dynamics rather than rate forecasts. We categorize this as a neutral-to-bullish stance on credit and duration, aligning with a constructive view on fixed income.
How other firms see it
No other firm commentary is available for this topic.
Market Implications
Continued strong demand for credit and duration could support tighter credit spreads and lower long-end yields. This may benefit long-duration bonds and credit-sensitive assets.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
UOB | Neutral | 1.1450 |
Citi | Bearish | 1.1000 |
MUFG | Bullish | 1.1800 |
From the original
Please join Ralf Preusser in conversation with Yuri Seliger and Meghan Swiber to discuss supple and demand in US bond markets. Strong supply in credit has been well absorbed, helped by a significant reduction in risk delivery to the private sector by US Treasury. Inflows are robu
Related speeches
4 itemsUS Dollar Credit Supply: Supply continues at a strong pace
Top of the Morning: Fixed Income Strategist - Almost ample
Per the full note [source], US fixed income has had a strong 2025 driven by spread compression and a US exceptionalism narrative, though April volatility reminded markets of tail risks. The UBS desk sees spreads as 'almost ample' — tight but sustainable absent a growth shock — and argues the Fed is likely done hiking. With no internal FX coverage and no near-term calendar events, the core thesis is that rate cuts are off the table through year-end, favoring carry in credit.
More from BOFA GLOBAL RESEARCH
5 items- BOFA GLOBAL RESEARCH
Post NFP Call
- BOFA GLOBAL RESEARCH
Signals & Noise: U.S. Equity Mid-Year Outlook 2026 — Buy Stocks, Not the Index
- BOFA GLOBAL RESEARCH
Must Read Research: Shifting Econ Outlook; Concentration Bubble Risk; Semis; Prediction Mkts
- BOFA GLOBAL RESEARCH
Signals & Noise: Updating the Outlook—Growth Up and Policy Tightening Ahead