JPMorgan Econ FI-Interest Rate Derivatives Polar vortex duration extension-106040070

SriniRamaswamyAC(1-415)315-8117PhilipMichaelides(1-212)834-2096NorthAmericaFixedIncomeJPMORGANsrini.ramaswamy@jpmorgan.comphilip.michaelides@jpmchase.comStrategyJ.P.MorganSecuritiesLLCJ.P.MorganSecuritiesLLC19January2024IpekOzil(1-212)834-2305ArjunParikh(1-212)834-4436ipek.ozil@jpmorgan.comarjun.parikh@jpmchase.comJ.P.MorganSecuritiesLLCJ.P.MorganSecuritiesLLCInterestRateDerivativesPolarvortexdurationextension•Maintainswapspreadwidenersinintermediatematurities.QTtaperexpectations,ariseinSOFRtowardsIOR,strongAOCIgainsforbanks,emergingFedspeakthatappearstolowertheoddsofnear-termBaselIIIendgameimplementation,aswellasvaluationsremainfavorable.Werecommendassetswappingoriginalissue10sthatareonthevergeoffallingunderthe5Ymaturitywindow…•…payin2.625%Feb‘29maturitymatchedswapspreads.Avariationonthisthemeistopairsuchspreadwidenerswithalongvolatilitypositionin2Yx2Yswaptionstraddles,tohedgeagainsttheriskfromrisingimplieds•Ontheswapyieldcurve,carryandslideremainthenameofthegameastheFedcontin-uestoleanagainstexpectationsofprematureeasingandforwardsappearlikelyto“rollup”withthepassageoftime…•…initiate1Yx2Y/3Mx30Yswapcurvesteepenerspairedwith65%riskinReds/10Yx5Yflatteners,and/orreceivefixedinthebellyofa6Mforward2s/7s/30sswapbutterfly(40:69weighted),toearnattractivecarryrelativetorisk•Thebondbasisonceagaininthelime...