JPMorgan Econ FI-US Fixed Income Overview Off to the races-109458157

1PhoebeWhiteAC(1-212)834-3092phoebe.a.white@jpmorgan.comJ.P.MorganSecuritiesLLCLiamLWash(1-212)834-5230liam.wash@jpmchase.comJ.P.MorganSecuritiesLLCHollyCunningham(1-212)834-5683holly.cunningham@jpmorgan.comJ.P.MorganSecuritiesLLCNorthAmericaFixedIncomeStrategy26July2024JPMORGAN•Economics:RealGDProseafirmer-than-expected2.8%q/qsaarin2Q,boostedinpartbystrongexportandconsumptiongrowth.CorePCErose0.18%m/minJune,leavingtheyear-agorateunchangedat2.6%.Weexpectnon-farmpayrollsrose150kinJulyastheunemploymentrateheldsteadyat4.1%.WelookfortheFOMCtoholdratessteadyatnextweek’smeeting•Treasuries:WeseelimitedroomfortheFOMCdecisionortheAugustrefundingannouncementtodrivesignificantTreasuryvolatilitynextweek.Wewaitforbetterentrylevelstoengageindurationlongs,givencurveinversionanddovishFedpricing,butcontinuetohold5s/30ssteepeners,hedgedwithbeta-weighted2-yearshorts.WepreviewtheAugustrefundingprocess:weexpectTreasurytoleavenominalauctionsizesunchangedandthinkTreasuryandTBACmightrevisittheT-billmarket.Breakev-ensremaintightlyrangeboundandwestayneutralonTIPS.IOTAshavenarrowedfur-therdespitethefocusonfundingpressures•InterestRateDerivatives:Wefavora‘synthetic’3Mforward5s/30sswapcurvesteep-enerconstructedbyreplacingthe5-yearlegwitha3Mx3M/3Mx2Ycurveflattenerandreducingriskonthe30-yearlegto65%.Wethinktherecentnarrowinginswapspr...