Macro Rates Strategy Report — April 22, 2026 (Updated)

⚡ What Changed Since March 26

US CPI (headline) 2.4% → 3.3%

US NFP -92K → +178K

US GDP Q4 (final) +0.7% → +0.5%

UK CPI 3.0% → 3.3%

UST 2Y 3.96% → 3.79%

UST 10Y 4.42% → 4.30%

BoE hikes priced ~85bps → ~39bps

BOJ Apr hike prob. 62% → 3%

VIX 25-27 → 18.8

JGB 10Y 2.25% → 2.40%

Bund 2Y 2.73% → 2.56%

S&P 500 — → 7,128 (ATH)

◆ Executive Summary

The energy/inflation shock is now fully in the data. March US CPI surged to 3.3% YoY (from 2.4%), driven by gasoline (+18.9%) and fuel oil (+44.2%). UK CPI rose to 3.3%. Eurozone inflation hit 2.5%. The "what if" scenario from our March report is now reality — but markets are shrugging it off (VIX 18.8, S&P near ATH).
The labor market muddied the clean stagflation story. US March NFP came in at +178K (vs -92K prior), the strongest print since December 2024. Unemployment fell to 4.3%. This gives the Fed more cover to hold — neither cutting (inflation too high) nor hiking (GDP still 0.5%).
Our #1 trade (Receive BoE 2y SONIA) has partially worked. BoE hike pricing compressed from ~85bps to ~39bps. The easy money has been made. We downgrade to #4 and rotate conviction to the US 2s10s steepener as new #1.
BOJ April hike expectations collapsed from 62% to 3%. Governor Ueda dialed back urgency amid global uncertainty. Our JGB short has worked (+15bps on 10Y) but the near-term catalyst has weakened.
Triple central bank week ahead (April 27-30). BOJ (Apr 28), FOMC (Apr 29), ECB (Apr 30), and BoE (Apr 30) all meet within 72 hours. The US 2s10s steepener and EUR 5y5y forward are the highest-conviction trades into this event cluster.

★ New #1 Long US 2s10s Steepener — structural bear steepening into Warsh transition + Treasury refunding

Macro & Policy Setup

🇺🇸 United States

Indicator	Value	Direction
CPI (Mar)	3.3% YoY headline, 2.6% core	Headline surged on energy; core ticking up
PCE (Feb)	2.8% headline, 3.0% core	Core eased slightly from 3.1% (Jan)
GDP (Q4 2025 final)	+0.5% annualized	Revised DOWN from +0.7%
NFP (Mar)	+178,000	Strongest since Dec 2024; beat +60K consensus
Unemployment	4.3%	Down from 4.44%
Wages	+3.8% YoY	Still firm
Fed Funds	3.50-3.75%	On hold since Dec 2025
Fed Stance	Hawkish hold	Dots still split; 0-1 cuts priced

Updated assessment: Murkier, not cleaner. March CPI at 3.3% confirms the energy shock is feeding through. But +178K NFP complicates the recession case. The Fed is more stuck than ever — inflation is too hot to cut, growth too fragile to hike, and labor just good enough to justify patience. The Warsh transition (May 15) remains the key wildcard for front-end repricing.

🇪🇺 Eurozone

Indicator	Value	Direction
HICP	~2.5% headline, ~2.4% core	Rising; energy feeding through
GDP (Q4 2025)	+0.2% QoQ	Revised down from +0.3%
2026 Growth Forecast	0.9%	Cut due to geopolitical uncertainty
ECB Deposit Rate	2.00%	On hold
ECB Stance	Cautious hold; June hike possible	Bloomberg consensus: first hike in June

Updated: Inflation revised up to 2.6% for 2026, growth cut to 0.9%. The ECB is now caught between rising inflation and slowing growth — a stagflationary bind similar to the Fed. Market consensus has shifted: most expect a hold on April 30 followed by a possible hike in June. Market pricing has moderated from 2-3 hikes to ~1. The disconnect is narrowing.

🇬🇧 United Kingdom

Indicator	Value	Direction
CPI (Mar)	3.3% headline	Up from 3.0%; energy pass-through
Services CPI	~4.3%	Still hot
GDP (Q4 2025)	+0.1% QoQ	Stagnant (Q1 2026 due May 14)
Bank Rate	3.75%	On hold
MPC Vote	9-0 hold	Unanimous in March
Market Pricing	~39bps of hikes	Down from ~85bps (Mar 26)

Updated: The Gilt market panic has partially subsided — hike pricing compressed from 85bps to 39bps, validating our #1 trade call from March. However, UK CPI rising to 3.3% adds a complication: the BoE can't signal cuts while inflation is re-accelerating. The April 30 MPC is expected to hold unanimously. The remaining edge in receiving SONIA is smaller but not zero — Q1 GDP data (May 14) is the next catalyst.

🇯🇵 Japan

Indicator	Value	Direction
CPI (Feb)	1.3% headline, 2.5% core-core	Headline misleadingly low
BOJ Rate	0.75%	Held in March
Apr Hike Probability	3% (was 62%)	Ueda avoided hike signals on Apr 17
JGB 10Y	2.40% (+15bps)	Term premium rising despite hold expectations

Updated: The BOJ normalization story has been delayed, not derailed. Governor Ueda's April 17 speech avoided hike signals, and the market now assigns only 3% probability to an April hike. Global uncertainty has pushed the timeline out. But JGB 10Y still rose 15bps to 2.40%, suggesting term premium is doing the work that rate hikes haven't. The structural thesis (wages +5.5%, core-core 2.5%) remains intact for H2 2026.

Other Central Banks

Central Bank	Rate	Stance	Key Issue
🇨🇭 SNB	0.00%	Dovish hold	Zero bound; CHF safe-haven pressure
🇦🇺 RBA	4.10%	Hawkish	Raised 25bp in March; energy risk
🇨🇦 BoC	2.25%	Cautious hold	Q4 GDP contracted -0.6%; Apr 29 decision

Market Pricing vs Policy Reality

🇺🇸 Federal Reserve Roughly Aligned

Metric	Market Pricing	Official Signal	Gap
Cuts priced (2026)	0-1 (70-80% prob of zero)	Median dot: 1 cut	Aligned to slightly hawkish
Implied terminal rate	3.50-3.75% (year-end)	Longer-run: 3.1%	Market above neutral
Hike probability	~3-5% by June	Not discussed	Small but non-zero

Verdict: Unchanged — roughly aligned. The strong NFP (+178K) and hot CPI (3.3%) reinforce the hold stance. The Warsh transition (May 15) remains the key wildcard. If Warsh signals a more dovish tilt, the front end reprices 25-50bps lower rapidly.

🇪🇺 ECB Narrowing Disconnect

Metric	Market Pricing (Apr 22)	Mar 26 Pricing	Change
Hikes priced (2026)	0-1 hike (June possible)	2-3 hikes (~60-70bps)	Significant moderation
Implied year-end rate	2.00-2.25%	2.50-2.75%	25-50bps lower

Updated verdict: Narrowing disconnect. Market has moderated from pricing 2-3 hikes to ~1 possible June hike. The ECB has maintained optionality without endorsing hikes. The gap has compressed but June remains a live risk if inflation stays above 2.5%.

🇬🇧 Bank of England Narrowing — Partially Corrected

Metric	Market Pricing (Apr 22)	Mar 26 Pricing	Change
Hikes priced (2026)	~39bps (1-2 hikes)	~85bps (2-3 hikes)	−46bps correction
Implied year-end rate	~4.10-4.15%	~4.50-4.60%	−40-45bps

Updated verdict: Partially corrected. The extreme repricing we flagged in March has moderated — 46bps of hike pricing has been removed. This validates our #1 trade. But ~39bps of hikes remain priced against a BoE that was 5-4 for a CUT two meetings ago. With UK CPI at 3.3%, the remaining edge is thinner — BoE cannot signal cuts while inflation is rising.

🇯🇵 Bank of Japan Aligned (on Hold)

Metric	Market Pricing (Apr 22)	Mar 26 Pricing	Change
April hike to 1.00%	3% (hold expected)	62% (hike expected)	Collapsed
Terminal rate	1.25-1.50% by 2027	1.25-1.50% by 2027	Unchanged (timeline pushed)

Verdict: Aligned — but direction flipped. Market was priced for a hike, now priced for a hold. BOJ is the cleanest story: Ueda has clearly paused amid global uncertainty. The question is whether this is a skip or a genuine rethink. Wage data and H2 inflation will determine.

III

Yield Curve Analysis

US Treasury Curve

−17bp 3.79%

−8bp 4.00%

−12bp 4.30%

10Y

−5bp 4.88%

30Y

Bull Steepening — Front end rallying faster than long end (Δ since Mar 26 shown above)

2s10s

+51bps

was +46

5s30s

+88bps

was +85

5Y Real

~1.44%

was 1.48

10Y Real

~1.90%

was 2.05

5Y BE

2.56%

was 2.63

10Y BE

~2.40%

unch

5Y5Y Fwd

~2.24%

was 2.11

Front-End

2Y rallied 17bps to 3.79% as the market settled into the Fed-on-hold consensus. Strong NFP prevents cut pricing; hot CPI prevents hike pricing. Anchored. Warsh appointment (May 15) remains the catalyst for a further move.

Belly

5Y at ~4.00% eased modestly. Still the pivot point absorbing policy uncertainty and intermediate inflation risk. Relative cheapness vs forwards persists.

Long-End

30Y at 4.88%, barely off the 5% test. Term premium remains elevated from fiscal deficit and basis-trade fragility (~$800B HF short). Treasury QRA in May is the next supply catalyst.

Breakevens

5Y BE eased to 2.56% (from 2.63%) despite the CPI surge — market treating the energy spike as transitory. But 5Y5Y forward ROSE to 2.24% (from 2.11%), suggesting longer-term inflation expectations are edging up. Watch this closely.

Cross-Market Yields

Market	2Y	10Y	2s10s	vs UST 10Y
🇺🇸 US Treasury	3.79%	4.30%	+51bps	—
🇩🇪 Bund	2.56%	3.02%	+46bps	-128bps
🇬🇧 Gilt	~4.25%	4.91%	+66bps	+61bps (inverted!)
🇯🇵 JGB	1.36%	2.40%	+104bps	-190bps

Key cross-market shift: Bund 2s10s steepened sharply from +27bp to +46bp as front-end rates fell (ECB hike pricing moderated) while 10Y held firm (fiscal premium). JGB 2s10s steepened to +104bps as 10Y rose on term premium despite collapse in hike expectations. Gilt-UST 10Y spread widened further to +61bps — UK risk premium persists.

Derived Metrics Dashboard

Fed Implied Terminal

3.50-3.75%

At current level (no cuts)

ECB Hikes Priced

0-1 (June?)

Was 2-3; moderated significantly

BoE Hikes Priced

~39bps

Was ~85bps; partially corrected

BOJ Apr Hike Prob.

Was 62%; collapsed

US 5Y Real Yield

~1.44%

Eased from 1.48%; still restrictive

US 10Y Real Yield

~1.90%

Down from 2.05%; still high

CFTC HF Net Short
~$800B
Near historical extreme

US-UK 10Y Spread
-61bps
Gilts above USTs (widened from -52)

VIX

18.8

Was 25-27; risk-on shift

WTI / Brent

$93 / $101

Oil elevated; Brent above $100

5Y5Y Forward

~2.24%

Was 2.11%; creeping higher

US-Germany 10Y

+128bps

Was +137bps; narrowing

Trade Ideas — Updated Rankings

1 Long US 2s10s Steepener — Structural Bear Steepening +5bp P&L

High · 8/10

Type

Curve trade

Horizon

2-6 months

Instruments

Long TU (2y futures) Short TY (10y futures) 2s10s swap steepener

Updated Rationale

Promoted to #1. 2s10s at +51bps (from +46), in line with our steepening thesis. The front end is firmly anchored by Fed hold plus potential dovish Warsh shift, while the long end faces persistent supply pressure ($2T+ deficit), rising term premium, and basis-trade fragility. The strong NFP reinforces the hold — no cuts to flatten the curve — while fiscal supply keeps the long end under pressure. Target: +75-100bps.

Catalyst (Updated)

Treasury QRA (May); Warsh confirmation; FOMC Apr 29 guidance; continued deficit prints; basis-trade positioning

Risks

Risk-off flight to quality compresses long end; oil reversal flattens inflation expectations; recession panic flattener

2 Pay EUR 5y5y Forward — Repricing European Neutral Developing

Med-High · 7.5/10

Type

Forward rates — structural repricing

Horizon

6-12 months

Instruments

EUR 5y5y forward OIS (payer) Pay 10y EUR vs Receive 5y EUR swap

Updated Rationale

Upgraded from #4 to #2. The thesis has strengthened. Eurozone inflation revised UP to 2.6%, growth CUT to 0.9%. June ECB hike is now Bloomberg consensus. Germany's EUR 500B infrastructure and NATO 3.5% GDP defense target continue to point to structurally higher neutral rates. "Japanification" thesis is dead. EUR 5y5y target: 2.75-3.25%. The April 30 ECB meeting is a near-term catalyst if Lagarde hints at June action.

Catalyst (Updated)

ECB Apr 30 communication; June hike decision; further defense spending commitments; Eurozone PMIs

Risks

Ceasefire reverses energy prices; European growth disappoints further; ECB explicit pushback on hike expectations

3 Long Bund / Short Gilt (10y) — Relative Value ~Flat

Med-High · 7/10

Type

Cross-market relative value

Horizon

3-6 months

Instruments

Long RX (Bund futures) Short R (Gilt futures) Bund-Gilt 10y asset swap box

Updated Rationale

Gilt-Bund 10y spread still at ~189bps, near crisis extremes. UK CPI at 3.3% is a headwind (keeps Gilt yields elevated) but UK growth remains stalled. The Bund front-end has rallied as ECB hike pricing moderated. Patience required — the convergence catalyst is UK growth data (Q1 GDP on May 14). Target remains 140-150bps.

Catalyst (Updated)

UK GDP Q1 (May 14); BoE Apr 30 tone; UK labor market data; any oil stabilization

Risks

UK CPI persistence forces BoE hikes; GBP weakness forces tightening; German fiscal drives Bunds higher faster

4 Receive BoE 2y SONIA — Fading the Hawkish Panic +46bp P&L ✓

Med · 6.5/10

Type

Outright rates — fading hawkish repricing

Horizon

1-3 months (remaining)

Instruments

SONIA Dec-26 futures (long) 2y Gilt (long) 2y SONIA OIS receiver

Updated Rationale

Demoted from #1 to #4. This trade has WORKED — hike pricing compressed 46bps from ~85bp to ~39bp. The easy money has been made. UK CPI at 3.3% limits further downside in rate expectations. The remaining ~39bps of hikes will only be fully priced out if Q1 GDP (May 14) comes in weak AND CPI starts to moderate. Reduced conviction but still a positive carry position.

Catalyst (Remaining)

UK GDP Q1 prelim (May 14); BoE Apr 30 communication; UK CPI moderation

Risks (Elevated)

UK CPI above 3.5% in April; services inflation re-acceleration; Sterling crisis forcing rate defense; BoE hawkish surprise

5 Short JGB 10y — BOJ Normalization (Delayed) +15bp P&L

Low-Med · 5.5/10

Type

Outright rates — policy normalization (delayed)

Horizon

6-12 months (extended)

Instruments

Short JGB futures JPY 10y OIS payer

Updated Rationale

Downgraded from 6.5/10 to 5.5/10. The trade has worked (+15bps on 10Y, from 2.25% to 2.40%) but the near-term catalyst has evaporated — April hike probability collapsed to 3%. JGB 10Y rose on term premium, not rate expectations. Structural thesis (wages +5.5%, core-core 2.5%) remains intact for H2 2026, but timing is now a drag. Consider taking partial profit and maintaining a reduced position.

Catalyst (Deferred)

H2 2026 BOJ meetings; spring wage data; yen weakness forcing timeline acceleration

Risks (Elevated)

Global risk-off triggers JGB flight to quality; BOJ pauses normalization through year-end; USD/JPY reversal

Final Ranking — Updated

Rank	Trade	Conviction	Score	Since Mar 26	Change
1	Long US 2s10s Steepener	High	8/10	+5bp (46→51)	↑ was #2
2	Pay EUR 5y5y Forward	Med-High	7.5/10	Developing	↑ was #4
3	Long Bund / Short Gilt 10y	Med-High	7/10	~Flat (189bp)	= was #3
4	Receive BoE 2y SONIA	Medium	6.5/10	+46bp ✓	↓ was #1
5	Short JGB 10y	Low-Med	5.5/10	+15bp (2.25→2.40)	↓ was #5 (lower score)

VII

Key Data Calendar — Updated

Date	Event	Outcome / Relevance
Apr 3	US NFP (March)	+178K (beat +60K consensus) — labor recovery
Apr 9	US GDP Q4 Final	+0.5% (revised down from +0.7%)
Apr 9	US PCE (February)	Core PCE 3.0% (down from 3.1%); modest easing
Apr 10	US CPI (March)	3.3% headline (up from 2.4%); energy shock in data
Apr 16	UK CPI (March)	3.3% (up from 3.0%); rising
Apr 27-28	BOJ meeting	Hold expected (97%); guidance key for H2 timeline
Apr 28-29	FOMC meeting	Hold expected; Warsh transition commentary
Apr 29	BoC decision	Hold at 2.25% expected; trade war impact
Apr 29-30	ECB decision	Hold expected; June hike signals critical
Apr 30	BoE MPC	Hold at 3.75% (unanimous consensus); tone key
Apr 30	US GDP Q1 (advance)	Consensus ~0.5% annualized; key growth read
May	Treasury QRA	Refunding size → long-end supply catalyst
May 14	UK GDP (Q1 prelim)	Critical for BoE thesis & Gilt-Bund trade
May 15	Powell term expiry	Warsh transition → front-end repricing risk

VIII

Risk Scenarios — Updated

▲ Bull Case (Lower Yields)

Middle East ceasefire → oil collapse below $70 → CPI reverts to 2.5%
Q1 GDP confirms recession → Fed forced to cut in H2
Warsh signals dovish pivot → front-end rallies 30-50bps
Risk-off event → flight to quality compresses curves

▼ Bear Case (Higher Yields)

Iran escalation → Hormuz blocked → oil $150+ → CPI above 4%
May Treasury QRA surprises with larger supply → 30Y tests 5.25%
Basis-trade unwind → disorderly long-end selloff
5Y5Y forward breaks above 2.5% → expectations de-anchoring

● Base Case (Updated)

Protracted tension → oil $85-105 range; CPI 3.0-3.5%
All four CBs hold this week; signal patience
US curve bear steepens to +65-75bps by June
BoE/ECB hike pricing continues to moderate
BOJ normalization pushed to H2 2026