JPMorgan Econ FI-US Fixed Income Overview See you in September-109990106

VIP专享

3.0 西装暴徒 2024-09-09 28 561.64KB 12 页免费

侵权投诉

Phoebe White

(1-212) 834-3092

phoebe.a.white@jpmorgan.com

J.P. Morgan Securities LLC

Liam L Wash (1-212) 834-5230

liam.wash@jpmchase.com

J.P. Morgan Securities LLC

North America Fixed Income

Strategy

23 August 2024

JPMORGAN

•Economics: The preliminary benchmark payroll revisions lowered total payroll growth

for the year through March 2024 by 818k. Initial claims remained relatively unchanged

at 232k for the August employment report reference week

•Treasuries: Chair Powell’s dovish tone supports our forecast of consecutive 50bp at

each of the next two meetings, but the August employment report is still two weeks

away, valuations are no longer cheap, and dealer positioning is elevated, so we stay neu-

tral duration for now. Powell’s comments support further long end steepening, and we

recommend holding 5s/30s steepeners to express our core view. Hold tactical 5y5y

inflation swap longs

•Interest Rate Derivatives: Policy uncertainty remains elevated with OIS markets plac-

ing significant weight on both deep cutting and shallow cutting scenarios. Yields should

remain sensitive to new economic and policy information which supports jump risk and

elevated realized volatility. We remain bullish on volatility in short expiries. We remain

positioned for swap spread curve flattening and we recommend initiating exposure to

a flatter 5s/30s swap spread curve

•Short Duration: RRP balances have stabilized around $300bn, with limited room to

decrease further. Both domestic bank borrowing in the O/N unsecured market and US

banks’ participation in the repo market remain minimal, suggesting reserves have not

transitioned from abundant to ample yet

•Securitized Products: Mortgages had a relatively unexciting week, with lower cou-

pons tightening modestly and the rest of the stack close to unchanged. We think mort-

gage credit spreads can remain rangebound for the rest of the year. We see value in upper

IG mezz CMBS and 5yr Agency CMBS bonds

•Corporates: HG bond spreads were stable last week despite declining yields. August

on track to be the 4th consecutive month of positive returns, supporting demand. We

revise up our FY24 supply forecast to $1.5tn leaving $400bn to go in 2024

•Near-term catalysts: July personal income (8/30), July JOLTS (9/4), Aug employment

(9/6), Aug CPI (9/11), Aug PPI (9/12)

Over the past week Treasury yields are lower and spreads roughly stable across both corpo-

rate and mortgage markets as the economic data continue to reinforce only gradual cooling

in the economy, the issuance calendar remains light, and Fed communications confirm

expectations of a rate cutting cycle beginning in September. Indeed there was little fanfare

from what sparse data was released this week. The preliminary benchmark revisions low-

ered total payroll employment growth for the year through March 2024 by 818k (0.5%),

decreasing job growth by about 70k/month to a ~175k monthly run rate over the period. It

is difficult to say exactly how the Fed will interpret this data, given that the revision cuts off

in March 2024 and the implications for more recent months are not fully clear (see US:

Benchmark brings big downward revision to (lagged) jobs, Abiel Reinhart, 8/21/24). At the

same time initial jobless claims for the August employment reference week remained

roughly unchanged over the week at 232k, but are 13k lower than the July reference week,

and claims continue to follow a similar summer seasonal path as the last few years (see US:

Good news from mostly stable jobless claims, Abiel Reinhart). The data support our view

that the economy is slowing with low risks of a recession.

Must Read This Week

Cuts are coming, Michael Feroli, 8/23/24

Focus: Beryl and July jobs, Abiel

Reinhart, 8/23/24

July FOMC minutes highlighted labor

market risks, Abiel Reinhart, 8/21/24

US: Benchmark brings big downward

revisions to (lagged) jobs, Abiel Reinhart,

8/21/24

US Fixed Income Overview

See you in September

Phoebe White

(1-212) 834-3092

phoebe.a.white@jpmorgan.com

J.P. Morgan Securities LLC

Liam L Wash (1-212) 834-5230

liam.wash@jpmchase.com

J.P. Morgan Securities LLC

North America Fixed Income

Strategy

US Fixed Income Overview

23 August 2024

JPMORGAN

Instead, market participants were focused on Fed communications, which laid the ground

work for an upcoming easing cycle. Even before the release of the July payrolls report, the

July FOMC minutes revealed that “the vast majority” of the FOMC were ready to cut by the

September meeting. Notably “many” participants noted the risks around cutting too little or

too late while only “several” thought reducing rates too soon or too much could risk a resur-

gence in inflation (see July FOMC minutes highlighted labor market risks, Abiel Reinhart).

Meanwhile this week Fed speak offered support for a “gradual” or “methodical” pace of

cuts. However markets were most keen for Chair Powell’s Friday Jackson Hole speech

where his comments skewed dovish. The Chair stated “the time has come” to adjust interest

rates and that the Committee does “not seek or welcome further cooling in labor market

conditions.” Unsurprisingly, our monetary policy NLP read Powell’s speech as more dovish

than his press conference at the July FOMC meeting, and his most dovish speech since the

fall of 2021 (Figure 1Chair Powell’s 2024 Jackson Hole speech scored as his most dovish in nearly 3 years, also see Fed, Powell: Review and Outlook, Joseph Lupton, 8/23/24).

Whether the FOMC cuts 25bps or 50bps at the September meeting still hinges on the next

monthly employment report, though Powell’s comments arguably lower the bar for the Fed

to deliver a 50bp cut next month (see Cuts are coming, Michael Feroli, 8/23/24).

Figure 1: Chair Powell’s 2024 Jackson Hole speech scored as his most

dovish in nearly 3 years

Jerome Powell Hawk-Dove history, using speeches, testimonies, and press conferences

-60

-40

-20

Aug 18 Aug 20 Aug 22 Aug 24

Source: J.P. Morgan

* For methodology, see Listen up: Upgrading J.P.Morgan’s central bank NLP machine, Joseph Lupton

and Dan Weitzenfeld, 7/2/24

Figure 2: As one might expect, yields have tended to be much more

sensitive to Fed-speak in periods of significant policy uncertainty

Size of the Nth percentile absolute change in the Fed sentiment index* on days with one

or more Fed-speak events, grouped by policy clarity or uncertainty regime**, for various

selected values of N from 10 to 90. Past 6 months; bp

10% 20% 30% 40% 50% 60% 70% 80% 90%

Policy Uncertainty

Policy Clarity

Source: J.P. Morgan, Bloomberg Finance, L.P.

* The Fed sentiment index is computed as the cumulative sum of yield changes in 5-year note Treasury

futures in the 15-minute period following the first Fedspeak headline on Bloomberg. Fedspeak is

defined as any speech, FOMC meeting or FOMC minutes. ** Days on which the absolute difference

between the total weight on deep cut scenarios and shallow cut scenarios was between 0.25 and 0.75

are classified as days characterized by Policy Uncertainty, while all other days are deemed to have

Policy Clarity. For more details see Interest Rate Derivatives

As we look ahead, we continue to forecast 50bp cuts at the September and November meet-

ings followed by 25bp per meeting thereafter. Our forecast is rooted in both the resumption

of the disinflationary process which remains broad based across components, together with

ongoing loosening in labor markets, which has reduced the risk prices remain sticky. With

the beginning of the easing cycle less than a month away and OIS forwards pricing in 103bp

of easing through YE24 compared to our own projection of 125bp, this would indicate there

is value to being long duration. However we remain patient as growth data has turned more

favorable in recent weeks and we do not think the debate surrounding the pace of easing will

be settled before the August employment report. Moreover valuations look close to our fair

value estimate, and in an environment in which term premium is biased higher, we think it’s

unlikely that valuations overshoot to the rich side of fair value. Thus, we remain neutral on

Phoebe White

(1-212) 834-3092

phoebe.a.white@jpmorgan.com

J.P. Morgan Securities LLC

Liam L Wash (1-212) 834-5230

liam.wash@jpmchase.com

J.P. Morgan Securities LLC

North America Fixed Income

Strategy

23 August 2024

JPMORGAN

duration but continue to favor 5s/30s steepeners as a medium-term expression of our bullish

view (see Treasuries).

Turning to inflation markets, intermediate breakevens remain cheap to our fair value frame-

work, though the model residual narrowed on Friday, given a dovish shift from Fed Chair

Powell. In recent months, the Fed’s wavering confidence in disinflation and thus a height-

ened focus on labor market data created a less supportive backdrop for TIPS, with real yields

demonstrating lower sensitivity to nominal yields in rallies than in sell-offs. However, we

argue that the backdrop is becoming more supportive for TIPS once again. Along the curve,

the intermediate sector continues to offer value, and forward-starting swaps avoid the nega-

tive carry associated with spot breakeven positions. With the fundamental backdrop turning

more supportive and valuations still cheap, albeit somewhat less cheap than a week ago, we

maintain tactical long exposure in 5Yx5Y inflation swaps (see TIPS).

Despite the near certainty of a cut in September, the pace and extent of easing remain uncer-

tain with OIS markets placing significant weight on both deep cut and shallow cut scenarios.

In this period of elevated policy uncertainty, yields should remain highly sensitive to both

new economic and policy information; Figure 2As one might expect, yields have tended to be much more sensitive to Fed-speak in periods of significant policy uncertainty shows the percentile moves in yields

around Fedspeak events and indicates that markets are prone to greater sensitivity during

periods of elevated policy uncertainty. Such a backdrop is conducive to jump risk and sup-

portive of elevated realized volatility. Thus with significant jump risk going into August

payrolls and beyond, we remain bullish on volatility in short expiries. We also remain posi-

tioned for a flattening in the swap spread curve. Front-end spreads should be biased wider

as SOFR and GC rates normalize and net T-bill supply turns negative in September whereas

long-end spreads should narrow against the backdrop of rising term premium. Therefore,

we now recommend initiating exposure to a flatter 5s/30s swap spread curve (see Interest

rate derivatives).

Turning to Fed’s balance sheet, the July FOMC minutes did not reveal much new informa-

tion. The SOMA manager noted that repo rates had risen due to increased demand for financ-

ing Treasury securities and balance sheet normalization. Meanwhile, the manager conclud-

ed that reserves remained abundant but emphasized that the staff would continue to closely

monitor developments in money markets. We agree, as we note domestic banks remain

largely absent from overnight funding markets, whether in fed funds or Eurodollar deposits,

while bank call reports show little increased net reverse repo activity YTD, as the GC/IORB

spread remains subdued (Figure 3Domestic banks have remained largely absent from the overnight market, both in fed funds and Eurodollar deposits). If we were to see increasing participation of banks with-

in overnight markets or an increasing percentage of overnight Treasury repo transacted at

or above IORB, this would signal reserve scarcity is approaching. To that end, bank reserves

have been steady at ~$3.4tn while ON RRP balances have fallen by ~$700bn YTD as MMFs

have shifted towards T-bills and non-Fed repo. We think there is limited room for ON RRP

to move much below the current low $300 level, given operational considerations for MMFs

to meet unexpected liquidity needs, and we think QT can continue through year-end (see

Short term fixed income).

研报加载中……请稍候！
如果长时间未打开，您也可以点击刷新试试。

下载研报到电脑，查找使用更方便

立即下载

摘要：

1PhoebeWhiteAC(1-212)834-3092phoebe.a.white@jpmorgan.comJ.P.MorganSecuritiesLLCLiamLWash(1-212)834-5230liam.wash@jpmchase.comJ.P.MorganSecuritiesLLCNorthAmericaFixedIncomeStrategy23August2024JPMORGAN•Economics:ThepreliminarybenchmarkpayrollrevisionsloweredtotalpayrollgrowthfortheyearthroughMarch2024...

展开>> 收起<<

JPMorgan Econ FI-US Fixed Income Overview See you in September-109990106.pdf

共12页,预览4页

还剩页未读，继续阅读