As markets return from the summer lull, we have been revisiting the tactical macro framework that underpins our views on US 10Y yields and broader G10 fixed income. It is the process behind some of our most differentiated calls into year-end and one of the reasons our research often diverges from consensus.
Our framework is deliberately positioning first. We begin with flows and sentiment, then layer in the fundamentals. That structure helps us judge where US 10Y yields are likely to move over a one to three month horizon. The five pillars are:
Positioning & Flows: When speculators and CTAs are crowded on one side, flow risks dominate. That imbalance often dictates the first move in yields.
Macro Surprises: The data versus expectations matters more than the absolute level. Growth, inflation, and labour market surprises set the tactical direction.
Fed Policy: Distinguishing between a debate on the Fed’s destination (neutral rates) and the sequencing of cuts is critical. Each narrative carries very different bond implications.
Net Supply: Issuance, balance sheet policy, and auction dynamics tilt the near-term balance of risks. Surprises here matter more than the expected path.
Seasonality & Technicals: Patterns such as weaker duration demand in September and October or Japanese fiscal year flows can amplify positioning or macro-driven moves.
Too often, market research leans narrowly on macro forecasts or policy narratives. Our approach is different: tactical, cross-asset, and rooted in positioning. This helps us sidestep consensus traps and sharpen timing.
It is a process that has already delivered:
- Turning bearish bonds last year when positioning was extreme long.
- Fading “Trumpflation” euphoria at the start of this year.
- Leaning bullish earlier in 2025 as “Sell America” flows reversed.
- Flagging September and October seasonality as a recurring headwind for duration.
By starting with positioning and layering in macro, policy, and supply or seasonal dynamics, our framework provides a systematic lens not only on where yields are headed but also on how investors are likely to behave along the way. That behavioural insight is what makes it so effective in tactical strategy.