JPMorgan recommends key US Treasury bond strategy
JPMorgan strategists expect 10-year US Treasury bonds to outperform 30-year bonds ahead of the US Treasury's quarterly borrowing plan announcement on November 4.
The team led by Jay Barry recommended a yield curve steepening strategy based on the expectation that 30-year Treasury yields will rise more than 10-year yields. The bank said expectations that the Federal Reserve (Fed) will not raise interest rates before December support this position.
Potential decisions by the US Treasury regarding long-term bond issuance have prompted differing views among financial institutions. While Barclays and UBS do not expect significant changes in Treasury auction sizes in November, Citi forecasts separate $3 billion reductions in 20-year and 30-year bond auctions. JPMorgan expects the Fed to keep interest rates unchanged in October before raising them in December. Meanwhile, UBS has raised its year-end forecast for the 10-year US Treasury yield to 5.2%, citing tighter monetary policy and elevated oil prices.
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