Bank of America Merrill Lynch’s August 2025 Capital Markets Outlook

• U.S. Treasury Bonds: In multi-asset portfolios, we modestly reduced exposure to U.S. Treasury bonds to increase equity allocations. Real yields (i.e., yields net of expected inflation) across the yield curve stand at approximately 1.40%–2.60%, near the upper end of their post-2008 range. Significantly elevated yields relative to inflation are positive for savers. • U.S. Corporate Bonds: In multi-asset portfolios, we modestly reduced exposure to U.S. investment-grade (IG) corporate bonds and adopted a neutral stance on high-yield (HY) bonds—again to increase equity allocations. This view reflects relatively rich valuations: although absolute yield levels remain attractive (partially offsetting valuation concerns), they may continue to support strong demand for high-quality fixed income. • Credit spreads have recovered much of the widening observed in April and are now trending tighter year-to-date. IG spreads stand at ~75 bps; HY spreads at ~285 bps. In our view, valuations remain relatively rich, leaving limited room for further spread compression—this is the primary reason for our slightly cautious stance on credit within multi-asset portfolios. • Nonetheless, we broadly expect the near-term credit environment to remain supportive—though with several caveats. Economic data have consistently exceeded expectations, pointing to resilient consumer activity, solid (albeit moderating) GDP growth, and inflation gradually converging toward the Federal Reserve’s long-term target. Credit fundamentals remain sound: revenues and profits are growing, margins are resilient, and overall leverage continues to improve. Fundamental trends in high-yield debt are more divergent than in investment-grade debt; however, default rates are expected to decline over the next 12 months, which should support HY spreads. • Technically, the backdrop remains the strongest argument supporting outperformance of both IG and HY credit versus broader markets. The credit market remains yield-driven, and yields remain at levels that attract incremental buyers while sellers remain scarce. Moreover, we anticipate a contraction in net supply during the summer months, providing additional tailwinds for our constructive technical outlook. Key risks to credit demand include Federal Reserve policy—specifically, a dovish pivot by the Federal Open Market Committee (FOMC) and potential declines in Treasury yields. • Tax-Exempt Bonds: In multi-asset portfolios, we modestly reduced exposure to both U.S. investment-grade and high-yield tax-exempt bonds. However, for tax-sensitive investors, we believe both investment-grade and high-yield tax-exempt securities remain attractive at current valuations. We note that tax-exempt municipal bonds significantly underperformed Treasuries in the first half of the year, rendering valuations more attractive. Seasonal increases in principal and interest repayments are expected to boost reinvestment demand in August, tightening (i.e., “richening”) municipal valuations—though higher new issuance volumes may partially offset this effect. We view federal funding cuts under the ‘Great American Bill’ as manageable for the vast majority of municipal issuers, though healthcare and private higher education sectors continue to face challenges. • Mortgage-Backed Securities (MBS): In multi-asset portfolios, we modestly reduced exposure to MBS to increase equity allocations. Spreads on MBS remain slightly favorable relative to other high-quality fixed-income assets—particularly IG corporate bonds. The primary concern for MBS investors—duration extension—has largely already occurred, though interest-rate volatility remains elevated relative to the past decade. In our view, the risk-reward profile for this rate-sensitive sector is now more balanced. Importantly, MBS spreads have converged toward their 10-year average, limiting upside potential in an environment of heightened rate uncertainty. Two developments warrant close monitoring for potential impact on MBS valuations: easing of banking regulation and possible privatization of Government-Sponsored Enterprises (GSEs).

Biotech: Lakeshore Bio, Forced Delisting from U.S. Markets

Since Sinovac received its delisting notice (unusual: Sinovac ordered to delist), more peers in the pharmaceutical industry have become acutely aware of the stringency of U.S. listing requirements. This year, another Chinese biopharmaceutical company was forced to delist from U.S. markets: Lakeshore Bio (formerly NASDAQ ticker: LSB; formerly known as Yisheng Biopharma), a biopharmaceutical firm focused on vaccine R&D and manufacturing, whose core products include lyophilized human rabies vaccine. The company listed on NASDAQ around 2022 but completed its delisting process from NASDAQ on November 4, 2025, due to compliance issues and market-related factors. I. Core Reasons for Delisting The direct trigger for Lakeshore Bio’s delisting was its prolonged failure to meet NASDAQ’s minimum share price requirement. Under NASDAQ rules, listed companies must maintain a share price above $1.00 for at least 30 consecutive trading days. Lakeshore Bio’s share price had fallen below this threshold for an extended period. Although the company executed a 10:1 reverse stock split in October 2024—temporarily lifting its share price into the $5 range—subsequent weak market confidence and short-selling pressure caused the price to fall below $1.00 again, ultimately triggering the delisting procedure. Additionally, internal governance disputes over control indirectly contributed to the delisting. As reported by PharmaRounds in 2024: Fund Managers Replace Founder as Largest Shareholder of This Domestic Biotech Between 2024 and 2025, Lakeshore Bio’s shareholders—including founder Zhang Yi’s team, Summit Horizon, and Crystal Peak Investments—clashed over issues such as pricing in private placements and equity restructuring, leading to multiple lawsuits and corporate governance controversies. These disputes further eroded investor confidence and deprived the stock of upward momentum. II. Key Timeline Milestones 1. October 2024: Due to sustained sub-$1.00 share price, Lakeshore Bio implemented a 10:1 reverse stock split to preserve its listing status; 2. September 12, 2025: Received NASDAQ delisting determination letter, notifying suspension of trading; 3. September 22, 2025: Lakeshore Bio’s shares were formally suspended from trading on NASDAQ and subsequently transferred to the OTC Pink marketplace (ticker symbols changed to LSBCF and LSBWF); 4. November 2025: Announced a definitive merger agreement with Oceanpine Skyline Inc. for a going-private transaction, offering $0.90 per share; total implied valuation ~$37 million; expected closing in Q1 2026.

Bank of America Increases Stake in Lsb Industries Inc.

Aug 30, 2026

Bank of America increased its stake in Lsb Industries by 124.7% in Q1 to 249,021 shares worth $3.71 million, despite the company reporting a quarterly loss.

MarketBeat

2026-07-15

Hillsdale Investment Management Inc. Invests $4.42 Million in Lsb Industries Inc. $LXU

2026-08-01

Arrowstreet Capital Acquires Stake in LSB Industries Inc.

2026-08-30

Bank of America Increases Stake in Lsb Industries Inc.

2026-09-02

Empowered Funds LLC Makes New Investment in LSB Industries Inc. ($LXU)

2026-09-09

Bank of New York Mellon Corp Acquires New Stake in LSB Industries Inc.

Bank of America Increases Stake in Lsb Industries Inc.

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