Everyone’s in the “Anything But Bonds” rally and “no one’s in the long-end.”

So said BofA’s Michael Hartnett in the latest installment of his popular weekly “Flow Show” series.

The implication was clear enough: Left-for-dead bonds may be primed for a rally in the event recent softening in the US macro proves durable.

Running quickly back through the last several key releases, we’ve seen i) ISM manufacturing fall back into contraction joined by ISM services, ii) consumer confidence print the lowest since summer of 2022, iii) NFP and AHE undershoot and iv) initial jobless claims jump to the highest since August (even as the week-to-week increase was apparently amplified by a seasonal distortion out of New York).

“The US economic data is now slowing meaningfully versus prior expectations [with] the Bloomberg US Economic Surprise Index at 14-month lows,” Nomura’s Charlie McElligott noted.

Of course, not all of the data’s soft and even the data that is only counts as “soft” in the context of a run-it-hot economy. The Atlanta Fed’s GDPNow tracker doesn’t exactly point to a slowdown. It’s early yet, but growth’s tracking 4.2% for Q2 as of the latest update.

Hartnett pointed to the persistent disconnect between small business credit perceptions and jobless claims (on the left, below).

He also noted that white collar payrolls have effectively stopped growing (on the right).

A lot obviously hangs on next week’s US inflation update. “It’s all up should [a] weak April CPI follow weak ISM and payrolls, confirm[ing] peak ‘no landing,'” Hartnett said.

By “it’s all up,” he meant unloved bonds could find some friends. Treasurys, he said, might “test key ‘bear-to-bull’ levels” in the event of a soft CPI print. Those levels for Hartnett are 4.25% 10s and 4.45% on the long bond.

The 10-year’s already on track for the biggest monthly rally of the year.

Note that this week’s refunding series went pretty well. The 10-year offering tailed with middling stats, but the three-year went over fine, and reception for Thursday’s 30-year sale was decent with a modest stop-through.

“We remain constructive on the Treasury market and the takedown of the 30-year auction has reinforced this bias,” BMO’s Ian Lyngen and Vail Hartman said Friday.

Even if 10-year yields “struggle to push far below the 4.50% level,” that “doesn’t suggest the bullish tone won’t persist nor does it necessitate a bearish correction,” BMO’s team wrote, adding that “the onus is once again on the realized data to further support the move as the policy and business cycles move to the next stage, justifying putting cuts back on the table.” Or not. We’ll see.

If you ask Hartnett, “no landing” risk may be “peaking.” He juxtaposed the nascent slowdown in job creation with a “super-low” US savings rate to make the point.

“No one expects a recession,” Hartnett said. “The best pain trade for bears hedging a rise in ‘hard landing’ probabilit[ies] is long unloved 30-year Treasurys and staples”