Investing.com -- Bank of America said Tuesday that recent macroeconomic data points to increased odds of a reflation scenario for the US economy, similar to mini-cycle patterns seen between 2008 and 2020.

The bank noted that macro data shows higher probabilities of expansion scenarios along with reduced data dispersion, which together suggest growing reflation odds. BofA said the US economy may be two years into the current mini-cycle, which typically lasts three to four years, meaning the reflation wave could end by late 2027 or early 2028.

For Treasury yields, BofA maintains a bullish bias on duration despite higher reflation odds creating room for yield increases. The bank said it does not expect peak 10-year Treasury yields to exceed the approximately 5% early cycle peak during an ongoing mini-cycle.

BofA views 10-year Treasury levels above 4.4% to 4.45% as attractive for medium-term positioning in a late-cycle environment where fundamental fair value will likely continue to decline.

The bank recommends hedging structural long duration positions through several strategies. These include shorting 10-year Treasuries versus German bunds, with a current spread of 147 basis points and a target of 160 basis points. BofA also suggests 5s30s steepeners, with the current spread at 82 basis points versus a target of 130 basis points.

Additional recommendations include 6-month forward 2s10s flatteners in floor ladder format, currently at 17 basis points versus a 23 basis point curve reference. The bank also advises tactical shorts on 2-year Treasuries, currently at 4.01% with a reset target of 4.25%.