Summary of Key Points from the Conference Call Industry Overview - The conference call focuses on the **Global Macro Strategy Outlook** for 2026, particularly regarding interest rates and currency trends across G10 economies. Core Insights and Arguments 1. **Interest Rate Trends**: - Lower G10 rates and a weaker US dollar are expected to persist into the first half of 2026, with a reversal anticipated around the US midterm elections in November 2026 [1][4][6] - US Treasury yields are forecasted to end 2026 at **4.05%**, after reaching **3.75%** by June [3][6] - The yield curve is expected to steepen further, particularly in the euro area where the ECB is projected to cut rates to **1.50%** [3][6][18] 2. **Currency Outlook**: - The DXY is expected to decline by **5%** to **94** in the first half of 2026 before rebounding in the second half [6][41] - Risk currencies like AUD and SEK are anticipated to lead gains, while USD/JPY is projected to fall to **140** due to declining US rates [6][41][47] 3. **Inflation-Linked Bonds**: - TIPS breakevens in the US are expected to tighten into mid-2026, with a widening anticipated by the end of the year as economic conditions improve [8] 4. **Sovereign Supply Outlook**: - Net coupon bond supply across the G7 is expected to decrease by **14%** year-over-year, amounting to **$2.45 trillion** in 2026 [26][34] - The decrease in net issuance is anticipated across the US, euro area, Japan, and New Zealand [34] 5. **Regional Specifics**: - **United States**: The Fed is expected to cut rates to **3.125%** in 1Q26, with 10-year Treasury yields projected to reach **3.75%** in 1H26 [52][76] - **Euro Area**: The ECB's depo rate is expected to fall to **1.50%**, with 10-year Bund yields projected to decline to **2.30%** by 2Q26 [58] - **United Kingdom**: The Bank Rate is expected to reach **2.75%** in 2026, with 10-year gilt yields around **3.9%** [64] - **Japan**: JGB yields are expected to rise to **1.65%** for 10-year bonds by 4Q26 [71] Other Important Insights 1. **Market Dynamics**: - The interplay between US and global rates will shape both rates and FX performance in 2026, with a focus on duration and curve trades over credit beta [25][40] - The anticipated fiscal policy changes could significantly impact investor expectations regarding sovereign supply [39] 2. **Investment Strategies**: - Preferred trades include long 5-year Treasuries and yield curve steepeners via options [57] - In the euro area, long positions in EU vs Germany in the 5-year sector are recommended as a carry play [62] 3. **Risk Factors**: - A potential mild US recession could lead to a significant drop in the funds rate, impacting Treasury yields [16][80] - The risk of a global risk-off episode could widen spreads beyond current expectations [21] This summary encapsulates the key points discussed in the conference call, providing a comprehensive overview of the anticipated trends in interest rates, currency movements, and investment strategies for 2026.