Barclays_US_Rates_Research_2026_Outlook_A_delicate_pivot

This document is intended for institutional investors and is not subject to all of theindependence and disclosure standards applicable to debt research reports prepared for retailinvestors under U.S. FINRA Rule 2242. Barclays trades the securities covered in this report for itsown account and on a discretionary basis on behalf of certain clients. Such trading interestsmay be contrary to the recommendations offered in this report.Please see analyst certifications and important disclosures beginning on page 76.US Rates Research2026 Outlook: A delicate pivotHow will new Fed leadership shape the yield curve in 2026?Can inflation moderate amid easier fiscal policy? Will Fedbalance sheet policy and regulatory changes alter the marketdynamics? Is demand strong enough to absorb rising long-end supply? Are markets underestimating asymmetric risks?OverviewA curious balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3After a turbulent 2025, the US enters 2026 in a curious balance of softening labor markets vs.stable growth, falling inflation vs. easier fiscal policy, and broad-based demand vs. risingduration supply. The front end should rally as the Fed cuts, but long-term yields should remainelevated.Supply and DemandNot all about Treasury issuance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25We expect net debt issuance to fall in 2026 led by Treasuries in the front to intermediate sector,but long-end supply should rise, led by investment grade corporate bonds. UST demand shouldremain robust with banks stepping up following SLR relief, but primarily up to the intermediatesector.FICC ResearchMacro Research2 December 2025SIGNATUREAnshul Pradhan+1 212 412 3681anshul.pradhan@barclays.comBCI, USAmrut Nashikkar+1 212 412 1848amrut.nashikkar@barclays.comBCI, USJonathan Hill, CFA+1 212 526 3497jonathan.hill@barclays.comBCI, USSamuel Earl+ 1 212 526 5426samuel.earl@barclays.comBCI, USAndres Mok, CFA+1 212 526 8690andres.mok@barclays.comBCI, USDemi Hu, CFA+1 212 526 7398demi.hu@barclays.comBCI, USEveline Dong+1 212 526 9576eveline.dong@barclays.comBCI, USCompleted: 01-Dec-25, 20:22 GMT Released: 02-Dec-25, 12:00 GMTRestricted - ExternalCompleted: 01-Dec-25, 20:22 GMT Released: 02-Dec-25, 12:00 GMTRestricted - ExternalInflation MarketsYear-end tips for TIPS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36We recommend longs in 10y breakevens going into 2026 given the potential for inflation riskpremium to rise ahead of several known risk events. We compare Barclays' CPI forecasts in 2026and 2027 with market pricing. Money MarketsEasing pressures in 2026. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50We see funding pressures easing in 2026 as bank balance sheet capacity grows and with the Fedlikely becoming a substantial buyer of T-bills. Enhancements to the SRF would also help reduceupside funding risks. Rules on