Halister News

(Bloomberg) -- JPMorgan closing flattener trade as the incoming administration’s focus on fiscal expansion, reduced corporate tax rates may point to a “more balanced Fed outlook” and allow a faster pace of normalization than the market has priced, strategists led by Alex Roever say in note.

• All suggests long-end yields will remain under pressure during the near-term and curve will remain steep
  • NOTE: 5s/30s curve +9.3bp to 138.2bp,
• Remain bullish on TIPS breakevens, recommend holding 30Y wideners, as nominal yields are biased higher
• Potential for another 4-5bp of tightening in 10Y swap spreads as non-partisan budget analysis groups have estimated Trump’s proposed fiscal policies could “significantly widen the deficit”
  • “Based on same model,” every $100b of additional deficit is worth ~4-5bp to spreads
  • Earlier narrowing “consistent with an incremental expansion in outlays relative to most recent surveys”
  • NOTE: 10Y spreads -0.5bp to -14.1bp