JPMorgan Econ FI-Interest Rate Derivatives When it rains, it pours-106318539

SriniRamaswamyAC(1-415)315-8117PhilipMichaelides(1-212)834-2096NorthAmericaFixedIncomeJPMORGANsrini.ramaswamy@jpmorgan.comphilip.michaelides@jpmchase.comStrategyJ.P.MorganSecuritiesLLCJ.P.MorganSecuritiesLLC02February2024IpekOzil(1-212)834-2305ArjunParikh(1-212)834-4436ipek.ozil@jpmorgan.comarjun.parikh@jpmchase.comJ.P.MorganSecuritiesLLCJ.P.MorganSecuritiesLLCInterestRateDerivativesWhenitrains,itpours•WiththeTreasuryrefundingannouncement,theFOMCmeetingaswellasmonth-endallcoincidingonWednesday,therewasalreadymuchtoanticipatethisweek,andthere-emergenceofregionalbankconcernsandastellaremploymentreportmadethisaweektoremember.Therefundingannouncementwasinlinewithourexpectations,andtheFOMCmeetingsuggeststhattheFediswaitingformoreaccumulationofevidence(ratherthanbetterdata,inthewordsofChairPowell)thatsupportsthedisinflationarytrend.Allinall,wemaintainourexpectationthatcutswillbegininJune,althoughthereissomeriskofratecutsbeginninginMay•Thereislittleevidenceofbroaderstressfromthisweek’srenewedconcernsregardingregionalbanks,buttheprospectofescalatingconcernsandmarketexpectationsoffront-loadedFedeasingisnowatailriskworthconsidering•AfterFriday’sselloff,OISforwardsareclosertoourexpectationsforFedeasing,butthereisstillsomeroomlefttomakecarrytradesattractive.However,outrightcarrytrades-asopposedtoconditionalones-aren...