Goldman Sachs and BMO Capital Markets recommend positioning for Federal Reserve policy easing into January as investors gauge the outlook for rate cuts ahead of a slate of economic data this week, including PCE price indexes Wednesday. Barclays recommends holding forward curve steepeners.

* Barclays (Anshul Pradhan and others, Nov. 21 report)
** Recommends two-year forward 2s10s curve steepeners, finding “real rates in the belly of the curve too high and the forward rate curve too flat”
** “Overall, beyond a temporary price effect from higher tariffs, we see little reason to believe that the Fed would not be able to resume the easing cycle if it pauses”

* BMO Capital Markets (Ian Lyngen and Vail Hartman, Nov. 22
report)
** Recommended January fed funds futures (FFF5) at 95.555
(targeting 9.645, stop at 95.499)
** “The market-implied odds of a December rate cut have been slipping back down toward 50/50, and while we’re not ruling out a further decline from here, our expectations for the Fed to follow-through with a December cut remain intact”

* Citi (Jabaz Mathai and Alejandra Vazquez, Nov. 22 report)
** Maintains paid position in December FOMC OIS and recommends a cautious long position on duration into month-end

** “We believe that the Fed should put easing on hold, barring weak payrolls data in December — even then it can be argued that other labor market data such as jobless claims are indicating a resilient labor market”
** “We think the long end of the Treasury curve is attractive with 30y real rates at 2.35%, and with the market ignoring downside growth risks in the current ‘risk on’ environment”

* Goldman Sachs (William Marshall and others, Nov. 22 report)
** Recommends receiving January FOMC OIS (entered at 4.406%, targeting 4.28%, stop 4.48%)
** “While there are risks to an earlier deceleration than our baseline of per-meeting pace of cuts through Q1 implies, we think the broader justification for delivering at least one cut over the near-term remains reasonably solid”
** Sees broader labor-market figures painting a softer picture than in 2019, while re-rating in growth and Fed pricing leaves market vulnerable to disappointing news

* Morgan Stanley (Matthew Hornbach and others, Nov. 23 report)
** In 2025 macro outlook, forecasts that 10-year yields will reach 3.75% by mid-2025 and end the year just above 3.50%
** Economists see Fed pausing on rate cuts in 2H 2025: “While investors face the same uncertainty, we think that they will continue to buy Treasuries at lower yields — in part because the downside risks to growth come after a meaningful slowdown in real GDP growth in 1H25 versus 2024”

* Wells Fargo (Michael Schumacher and others, Nov. 22 report)
** “We maintain that the Dec. 2025 implied SOFR yield is a bit high but there will likely need to be a further slowdown in labor market activity to drive a sustained rally”