Bank of America asked its clients what they make of the Federal Reserve chair's communication. More than eight in ten said it is not working.
The rest of the call was an argument for why that stops mattering next week. Mark Cabana's rates team reads the long-end rally on the day of a hot inflation print as the bond market rewarding a Fed that has been forced back toward orthodoxy — and the survey as the measure of how much credibility there is to win back.
"And over 80% said that Chair Warsh's communications are ineffective."
This is BofA Global Research's weekly client conference call, published as a podcast: the firm's co-head of global rate strategy, its head of US economics, its inflation economist and two of its rate strategists, talking to each other about the numbers that landed that morning.
The full episode is covered here so you can skip it. 29 minutes of audio, 15 minutes of reading.
Here are the 13 calls that matter.
🎙️ Host: Mark Cabana, Co-head of Global Rate Strategy at BofA Securities
👥 Also on: Aditya Bhave, Head of US Economics at BofA Securities; Stephen Juneau, the firm's inflation economist; Meghan Swiber, who covers the TIPS market on the rate strategy team; and Ralph Axel, who covers long-dated asset swap spreads
📰 Published: 14 September 2026
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Key Takeaways
More than 80% of BofA's surveyed clients say the Fed chair's communications are ineffective 70% said fiscal consolidation, not faster hikes, is the realistic way to stabilize long-end rates
The desk is keeping its 75bps call against a market pricing close to 90bps of hikes Bhave's argument is that going fast and doing less buys more credibility than the reverse
Bhave expects the median dot to show two hikes this year, not the three BofA forecasts
The Taylor rule on spot data puts the funds rate at 5.2% — about 50-60bps above the last cycle's peak territory the market is now approaching
Inflation is not accelerating; it is stuck, and nothing in current policy gets it from 2.5% back to 2%
The core CPI beat came from wireless, airfares and lodging, and Juneau reads almost no signal in it An AT&T pricing change and the retirement of some unlimited plans drove the wireless jump
The Treasury's arrival as a buyer has taken the tail risk out of Axel's 30-year spread view He calls it a police force entering the market
Both Axel and Swiber say buybacks are too small to fix the long end, and the real lever is issuance at the November refunding
1. What the CPI Print Showed
Cabana opened the call by handing to Aditya Bhave on the morning's inflation data, and Bhave immediately handed to Stephen Juneau, the desk's inflation economist.
Core CPI beat, and Juneau's read is that almost none of it is signal. The beat was driven by core services, where he said the idiosyncratic factors sit
Wireless services were the largest single contributor to the surprise. Juneau attributed the jump to a carrier pricing decision rather than to inflation: "In fact, it seems to be driven by a change in AT&T pricing and also them retiring some unlimited plans where pricing on that went into effect this month" "You're unlikely to see that wireless phone services jump again next month"
Airfares and lodging away from home did the rest. "But those two sectors contributed eight basis points to core CPI, they tend to be volatile, right?" Airfares are rising on jet fuel prices tied to the Iran war, which he said may not reverse quickly but will find a ceiling
His summary was to discount the headline. "But to sum up really I wouldn't take a ton of signal from today's report given what's driving it, given that it is typically noisy"
2. The Core PCE Handoff
The number Juneau said actually matters is what the CPI and the previous day's producer price data imply for the Fed's preferred inflation measure.
Core PCE is tracking firmer than the desk expected. "So we're already kind of on the firmer side of expectations. After PPI, we had core PCE tracking at 26 basis points. After today's data, we're at 30 basis points"
The estimate carries more uncertainty than usual, because it has to assume how three methodology changes land — computer software and accessories, legal services, and portfolio management and investment advice — which take effect with the August report at the end of the month
The new methodology looks like a drag rather than a help. Portfolio management and investment advice came in weaker in the producer price data than the desk's estimate under the new method, and so did computer software and accessories
The residual seasonality of previous years did not show up. Juneau said the print points to a firm monthly core PCE figure rather than the usual seasonal distortion
3. The Case for Going Fast
Bhave took the Fed implications, and the market had already made most of the argument for him.
"We're now pricing over an 85% probability of a rate hike," he said, and the Fed does not usually refuse that: "And as far as I remember, it would be pretty much without precedent for the Fed to not follow through"
BofA's call is unchanged. "We've been calling for 75 basis points of hikes this year," and Bhave said the desk is comfortable with it
The market's own path is more aggressive than BofA's, and further out. Less than 40% probability on October and one full hike by year-end, but almost 90 basis points of hikes priced to terminal — more than the desk forecasts
His recommendation to the Fed is to front-load. Going fast and ending up doing less delivers more credibility than the reverse, and on that logic he would not wait: "So we would by no means rule out an October hike even though it's pretty close to the elections" A hike, he argued, is a way to put downward pressure on long-term yields — while conceding that oil was also falling and the long-end rally was not the Fed's alone
He does not expect a dovish hike. "I'd be surprised if he did, but my base case would be that he sounds somewhat hawkish and he sounds resolute in terms of continuing to go"
The thing to avoid is overshooting the signal. Bhave pointed to the European Central Bank the day before, where markets responded by pricing another 100 basis points, and said the emphasis should be on pace rather than on total
4. Why Inflation Is Stuck
Bhave set out the inflation view the rate call rests on, and it is not an acceleration story.
"And just to give you a little bit of background on how we're thinking about the inflation outlook, our argument is not necessarily that inflation is accelerating" — he agreed with Juneau that the latest data does not show things speeding up
The problem is that underlying inflation has stopped moving. On his account it sits around 2.5%, and that is the number you get after the Iran shock rolls off, after the revisions, and after tariffs roll off — in other words, after everything goes right
Nothing in current policy closes the last half point. Bhave said there is no policy impulse to get inflation from 2.5% back to 2%, which is the gap the hikes are meant to fill
The labor market is what makes the move possible now. He said the risks around it have dissipated and the outlook looks balanced, so this is the Fed's opportunity to deliver the impulse
Getting to 2% is the precondition for everything else. Once inflation is at target and stays there, he said, the Fed can think about cutting back toward current policy levels, and about the bigger questions that come up in conversation — including changing the inflation mandate. "But first you got to get back to 2%"
5. The Curve's Reaction
Meghan Swiber described what the market did in the minutes after the print.
The curve twisted, exactly as the desk expected. "So what we saw immediately following the print was as we would expect very notable twist flattening of the yield curve with front-end rates up and longer term rates down"
The market moved to roughly 90% odds on a 25 basis point hike next week
She read the price action as a message to the Fed chair. If the committee delivers on inflation credibility, that is what brings long-term borrowing costs down — the costs that rose sharply after a July meeting at which, in her description, Warsh sounded less credible and less focused on the point that the Fed has been missing its 2% core PCE target for some time
Under the surface it is real yields doing the work. Inflation compensation fell across the curve, more so at the front end, which she attributed to the day's move in oil rather than to the Fed
The position she still likes is a forward-starting real yield flattener. "From a curve perspective, we do still like being in forward starting real yield flatteners" — the trade that follows from the desk's out-of-consensus September hike call
6. What to Watch in the SEP
Cabana asked Bhave what would count as a surprise in the Fed's own projections next week.
The projections move slowly, so he expects them to lag the desk's call. "So, I'd be quite surprised if the SEP showed three hikes for the year. I would expect that it just shows two"
He named the officials who will feel vindicated — Logan, Hammack and Kashkari — and said they are probably arguing for a hike at every remaining meeting this year, without expecting them to move the median
A cut next year would not surprise him. Fifteen months is a long time, and some officials will reason that tightening lowers growth and inflation a little over the following year or two The open question is whether the projections incorporate the data revisions, which could show materially lower inflation and open the door to a cut for some members
Longer-run views will not move, he said, because they are the most inertial part of the document
The statement gets a tweak rather than a rewrite. He expects language linking inflation persistence to the need to hike, and flagged an open question over whether the productivity language survives, since productivity has not been strong for several quarters
7. How Far the Move Can Go
Cabana gave his own read of the day, and then asked how much further the repricing has to run.
His framing was that "the long end likes orthodoxy." The print forced the Fed's hand, the market got more confident on September, and long-dated yields took that as a return to normal central banking
The first milestone has already been passed. Pricing out last year's labor-market insurance cuts is done
The next milestone is the last cycle's peak, in the low fives, and it is close. Cabana put the market about 50 to 60 basis points away from it
A second framework points to the same place. "The Taylor rule also tells you that the funds rate using spot data should be 5.2% right now" — standard Taylor, spot data, no forecasting
What decides the rest is oil, financial conditions and the data. He noted that equities have so far not cared much, and said the question is no longer whether the cuts get reversed but how far past that the market goes
8. The Two-Week Repricing
Cabana put numbers on how much had already moved before asking Swiber for the drivers.
Measured from 24 August, the front of the curve has moved most. Two-year yields up over 40 basis points, ten-year yields up around 30, thirty-year yields up around 15 — all nominal
The shape of that move is the point. The largest repricing sits where Fed policy is priced, not where term premium lives, which is consistent with the twist Swiber described after the print
9. What Is Driving Rates
Swiber gave three drivers, in order of importance.
Fed expectations dominate. "So, a big part of this move really is just Fed expectations." She said what the market prices the Fed to reach in two years lines up closely with the ten-year rate Oil explains a further slice through inflation compensation, with a higher sensitivity at the front of the curve
The second driver is uncertainty about the Fed chair's reaction function, which she traced to the back-and-forth between the June and July meetings and the Jackson Hole comments
The third is uncertainty coming from the Treasury. "The surprise buyback announcement to do larger sizes at the long end" drew intense client attention, and the open question is whether it amounts to an interventionist policy or the start of something larger If the long end stays under pressure and buybacks do not work, she said the Treasury is more likely to have to adjust long-dated issuance at the November refunding
The fourth is a slower structural shift in who buys Treasuries. The buyer base now leans more heavily on investment funds, many with broad aggregate mandates that weigh Treasuries against other asset classes, which makes them sensitive to the spread available in investment-grade credit — and investment-grade supply has been heavy
10. Where Rates Go From Here
Swiber gave the desk's directional view, and the condition that would break it.
"We would say that overall the bias is likely lower, especially at the belly of the curve with the market pricing, the degree of hikes that it is right now"
The asymmetry comes from the gap between the market and the call. The market prices around 90 basis points of hikes against BofA's 75, so the burden of proof sits with the more aggressive path
Getting to Cabana's 5.2% would take two things at once: inflation that persists while the Fed is actively hiking, and no feedback loop from the hikes into financial conditions. She called both of those risks rather than expectations
Her second expectation is that the Treasury acts. Given the feedback from the buyback experiment, she expects something more meaningful at the long end
11. Treasury as Police Force
Cabana turned to Ralph Axel with two complaints about the week's buyback operation: a calendar that was less forceful on future sizes than the market wanted, and a Treasury that did not buy the maximum.
Cabana's own read was that the Treasury looked price sensitive. "It risks Treasury trying to do buybacks on the cheap"
Axel's reaction was the opposite, and it is about tail risk rather than this week's operation. "Yeah, I mean for me the introduction of the Treasury into the market as what I might call a police force is I think a very big deal for tail risk on 30-year spreads"
He has always liked Treasury swap spreads and has always preferred owning them at the front of the curve, where the swap margin is cheaper and the return on equity is higher He noted that two-year spreads did blow up around Liberation Day, so no part of the curve is genuinely safe
The thirty-year sector is where the carry is and where the fear was. Axel described the trade as sitting in very high carry, waiting for nothing to happen, and fearing the risk-off event that wipes the position out
The Treasury's presence changes that calculation. "Now that the Treasury has entered, I no longer fear with the same intensity that tail risk"
12. The Big Kahuna Is Supply
Cabana suggested the Treasury is learning as it goes, having probably been surprised by the negative long-end reaction to its schedule and its first buyback results. Axel agreed and said it is aiming at the wrong variable.
"I mean, for me, the big kahuna is the auction size. They're pumping in duration risk into a market that simply doesn't want it"
He would not call the week a failure. Spreads widened, the 5s30s spread curve steepened and 5s30s Treasuries flattened against the swap rate: "It wasn't an abject failure, but it's way too small and it needs to be beefed up"
The buyback tool is limited by design, which he said the team has written about — the scope for scaling it is not there
The fix he wants is less long-dated issuance, immediately. "The real kahuna is in reducing the long-end supply and please the sooner the better"
Cabana's closing note was that the November refunding is where that gets answered, and that the desk will be watching for signals ahead of it
13. What the Survey Said
Cabana ended by pulling three charts out of BofA's FX and rate sentiment survey, released that morning.
Asked what realistic policy action would stabilize global long-end rates, 70% of clients said fiscal consolidation. Around 20% said a faster pace of central bank hikes Cabana's reaction was disbelief at the first number: "My reaction to that is wow I'm surprised that so many people think it's realistic that we can get fiscal consolidation"
Asked about the Fed chair's communications and their potential inflation impact, the answer was close to unanimous. "And over 80% said that Chair Warsh's communications are ineffective" — clients do not think what he is doing will deliver the monetary policy outcomes he wants
Asked what has driven the global long-end move since the end of June, clients split almost evenly. The responses came in at roughly 30% each across the factors offered, among them hyperscaler supply and improved growth, over a period in which the US ten-year yield rose by close to 50 basis points Cabana's point was the flatness of the distribution: the market has no consensus explanation for one of the year's largest moves
Bonus Insights
The podcast is a recording of BofA's weekly client conference call, which Cabana said brings the firm's strategists together with guests from other parts of BofA Global Research to work through the week's most pressing questions
Bhave handed the inflation question straight back. Introducing Juneau as the desk's inflation expert, he said Juneau would "be able to say a lot more interesting stuff than I am," and took the Fed implications himself
Bhave put a policy question on the other side of 2% inflation. Once the Fed is back at target and holding, he said, the bigger conversations become live — including whether the inflation mandate itself changes
The call's bottom line is that the desk thinks the September hike is effectively settled, that the argument has moved on to how fast the Fed goes and whether the chair can sound convinced enough to keep long-dated yields falling, and that no amount of Fed credibility fixes the long end on its own while the Treasury keeps auctioning more thirty-year duration than the market wants.
Products, Companies & Tools Mentioned
BofA Securities (The firm whose weekly client call this is; every speaker is one of its strategists or economists, and the desk's published call is 75bps of hikes this year)
AT&T (The carrier whose pricing change and retirement of some unlimited plans Juneau blames for the wireless services jump that drove the core CPI beat)
The Federal Reserve (The subject of most of the call — the September meeting, the projections, and whether the chair's communication is doing any work)
The US Treasury (Its buyback program and long-dated issuance are the second half of the call; Axel calls its arrival in the market a police force)
The European Central Bank (Bhave's cautionary example — markets priced another 100 basis points after its meeting, which he says the Fed should avoid provoking)
Books & Resources Mentioned
BofA's FX and Rate Sentiment Survey (Released the morning of the call and flagged by Cabana as worth reading; the source of the three client charts in the final section. It is client research and has no public page)
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