JPMorgan Econ FI-US Fixed Income Overview Yield rise and HG spread tightening...-106039987

PhoebeWhiteAC(1-212)834-3092HollyCunningham(1-212)834-5683NorthAmericaFixedIncomeJPMORGANphoebe.a.white@jpmorgan.comholly.cunningham@jpmorgan.comStrategyJ.P.MorganSecuritiesLLCJ.P.MorganSecuritiesLLC19January2024LiamLWash(1-212)834-5230liam.wash@jpmchase.comJ.P.MorganSecuritiesLLCUSFixedIncomeOverviewYieldriseandHGspreadtighteninglikelyreachinglimit•Treasuryyieldscontinuedhigherandthecurvesteepenedonthebackofstronger-than-expectedeconomicdataandsomewhathawkishFedspeakwhileHGcreditspreadsnar-rowedfurthertoneartheirpost-GFCtightsasdemandhasoutstrippedsupply.Wethinkitisnowappropriatetoadddurationinthebellywhileweturnbearishoncreditspreadsandremainneutralonmortgagespreads•WereviewmonthlyTICdataforNovember.Foreigninvestorsbought$131bnlong-termsecuritiesacrossUSfixedincomeproducts,withforeignprivateinvestorsadding$167bnwhiletheforeignofficialsectorsold$36bn.PurchaseswereconcentratedinTreasuriesandcorporatesandlargelyemenatedfromtheEuroareaandtheUK•Economics:Retailsalesrose0.6%inDecember,withthecontrolgrouprising0.8%,providinganupsiderisktoour2.0%realGDPgrowthforecastfor4Q223.Initialclaimsfilingsfelltotheirlowestlevelsinoverayear•Treasuries:Werecommendadding5-yeardurationlongs:yieldsarebacktoearlyDecemberlevels,TIPSbreakevenslookrich,andpositioningappearsneutral.Long-endpairsremaintooflattotheirdrivers,thoughthe...