HALISTER1: RATES: UST Curve ‘Biased Steeper’ Near Term, JPM Says

RATES: UST Curve ‘Biased Steeper’ Near Term, JPM Says

(Bloomberg) -- Initiate UST 5/30 curve steepener on “extreme richness” of 10Y, recent flattening of 5/30 curve vs its drivers, and supportive auction cyclicals, JPMorgan strategists led by Jay Barry say in March 3 note.
  • Core inflation is firming, labor market improving, and Fed commentary suggests FOMC “will likely let employment conditions continue to tighten”
  • Ahead of next week’s 3Y/10Y/30Y auction cycle, weighted steepeners entered 10 business days before 30Y auctions in 2015 and closed the day of the auction “offered consistent profitability”
  • This “was likely driven partially by bloated dealer inventories,” and next week’s auctions “should also be difficult to digest” for same reason (See RATES POSITIONING SUMMARY)
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Jay Barry (JPMorgan Chase & Co)

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