PhoebeWhiteAC(1-212)834-3092HollyCunningham(1-212)834-5683NorthAmericaFixedIncomeJPMORGANphoebe.a.white@jpmorgan.comholly.cunningham@jpmorgan.comStrategyJ.P.MorganSecuritiesLLCJ.P.MorganSecuritiesLLC23February2024LiamLWash(1-212)834-5230liam.wash@jpmchase.comJ.P.MorganSecuritiesLLCUSFixedIncomeOverviewStayingthecourse•TreasuryyieldshaverisenfurtherinthewakeofasurprisinglyfirminflationprintandFedspeakthathasemphasizedpatience.WearehesitanttoreadtoomuchintoasinglemonthofdataandcontinuetothinkmoderatinginflationwillallowtheFedtocutinJune•TheFOMCminutesrevealedlessurgencytobegintaperingQT.WenowexpectaformalannouncementinJune,withaslowerpaceofrunoffbeginninginJuly.WethinkQTcancontinuethroughyear-endwhenONRRPbalancesreachapproximately$300bn•Economics:Weexpectnextweek’sPCEreporttoshowafirm0.47%m/mincreaseinthecoreindex.WewillalsogetavarietyofJanuaryGDPsourcereportsthatweexpecttogenerallybeweak•Treasuries:Weraisedourinterestratetargetstoreflectgreaterriskpremiumandalon-gerQTrunway.Weholdlongsin5-yearTreasuries:Fedpricingistoohawkishandpositioningisveryneutral.Weraiseourbreakeventargetsby5-10bpacrossthecurveandcontinuetoholdlongsin5-yearTIPS.Werecommendold10s/30sbreakevencurvesteepeners•InterestRateDerivatives:Remainbullishonvolatilityonthebackofheightenedpoli-cyuncertainty.Turnneutralonswapspreadsacrossthecurve...
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