US CPI, the US inflation curve, and the components of the Treasury/Bund spread
Report Coverage
- Broker
- BofA Securities
- Region
- United States / Eurozone
- Sector
- Finance
- Report Type
- Industry Report
- Primary Focus
- Above-market US CPI forecast supports higher inflation curve and Treasury/Bund spread widening
Report Summary
BofA forecasts headline US CPI rising 0.46% MoM in May (4.2% YoY, highest since April 2023), driven by energy price jumps, while core CPI should be cooler at 0.20% MoM (2.8% YoY). The broker argues the market underprices near-term US inflation, supporting a higher, flatter CPI curve and further widening of the 10-year Bund/Treasury spread. BofA recommends a 1s2s CPI curve flattener and long 2-year CPI swap positions.
Key Takeaways
- Headline US CPI forecast: +0.46% MoM, 4.2% YoY (highest since April 2023), driven by energy prices
- Core CPI expected cooler: +0.20% MoM, 2.8% YoY, reflecting modest goods inflation and normalizing rents
- BofA’s CPI profile is higher than market pricing from June onward, favoring a higher, flatter CPI curve
- 10y Bund/Treasury spread widening trade: initiated at 134.5bp, targeting 160bp, currently at 148bp
- US-Euro inflation swap spread at 28bp looks too tight vs. 51bp historical average since EMU in 1999
- Trade ideas: 1s2s CPI curve flattener (target -45bp) and long 2y CPI swap (target 3.10%)
- Supply chain pressures building from Iran conflict risk driving firmer core goods inflation in 2H
Why This Report Matters
BofA’s above-consensus CPI forecast and trade recommendations signal that the rates market may be underpricing near-term US inflation risks from energy and supply chain pressures. The Treasury/Bund widening thesis, supported by divergent growth and inflation prospects, offers a macro trade with clear risk/reward parameters for global fixed income portfolios.
Topics Covered
Who this summary is for
This summary is for users researching the BofA Securities US CPI, the US inflation curve, and the components of the Treasury/Bund spread report. It helps users review US CPI, the US inflation curve, and the components of the Treasury/Bund spread coverage, key takeaways, and related broker or sector research paths across US CPI inflation forecasting, Treasury/Bund spread trading, inflation curve positioning.
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