On Thursday morning, roughly around the time BofA's chief equity strategist Ssavita Subramanian slashed her S&P year-end price target by a whopping 25% from 4,500 to 3,600, Cabana's rates team published a must read note (which is also available to pro subs in the usual place), in which he wrote that the bank's rates team "is making substantial downward revisions to our rate forecasts following our US economics team's new call for a mild 2022 recession and lower Fed funds rate path."

What revisions?

Well, as of today, in addition to sharply lowering its stock targets, BofA is also slashing its 10y Treasury end '22 forecast from 3.50% to 2.75% and end '23 forecast from 3.25% to 2.50%. The cuts come as BofA's economics team yesterday also slashed its forecast to reflect a US recession in 2022 and materially lowered the Fed funds rate path with the terminal Fed funds rate lowered from 4.00-4.25% to 3.25-3.50%, as the BofA economics team now expects 100bp of Fed rate cuts between Sep '23 and Jun '24.

Needless to say, the new forecasts are "very bullish" vs the forwards given the market's expectation for Fed rate cuts in 2H23 and 1H24.

Some more details from Cabana:

The lower Fed rate path and rate cuts in '23-'24 are the most relevant aspects of our US economics team changes for the US rate path. We are lowering our 10yT end '22 forecast from 3.50% to 2.75% and end '23 forecast from 3.25% to 2.50%. Our new forecasts are very bullish vs the forwards given the expectation for Fed rate cuts in 2H23 and 1H24 (Exhibit 4). Our prior rate forecasts initially reflected a bullish rate bias vs the forwards but these revisions make us more constructive vs the current market.