Risks Skewed Toward Higher Front-End Yields, JPM Says
(Bloomberg) -- Markets are pricing in less tightening over next 12 months than at any point since mid-2014; consequently “risks to lower rates at the front end seem limited, and the OIS curve could be biased steeper over the near term,” JPMorgan strategists led by Jay Barry say in March 11 note.
- Also, March 16 FOMC meeting “poses a risk” of a “more balanced tone than in its January statement,” and “positions are long, particularly for momentum-based investors”
- Meanwhile, foreign demand should be “more focused longer out the curve,” keeping yields “more range-bound there”
- They recommend positioning for 1/5 curve steepening; spread is normally directional with the OIS curve, however it has lagged “and looks flat relative to the OIS curve”
- 3/7 steepener recommended last month should be unwound as “conditions are less favorable for earning carry at the front end”
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HALISTER1Source: BFW (Bloomberg First Word)
People Jay Barry (JPMorgan Chase & Co)
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