JPMorgan Econ FI-Short-Term Market Outlook And Strategy On your mark, get set...-109457947

1TeresaHoAC(1-212)834-5087teresa.c.ho@jpmorgan.comJ.P.MorganSecuritiesLLCPankajVohra(1-212)8345292pankaj.x.vohra@jpmchase.comJ.P.MorganSecuritiesLLCHollyCunningham(1-212)834-5683holly.cunningham@jpmorgan.comJ.P.MorganSecuritiesLLCNorthAmericaFixedIncomeStrategy26July2024JPMORGAN•OurTreasurystrategistsforecasta$1.915tndeficitinFY24,butthisestimateoverstatestheincreaseinprojectedoutlays,asit’spartiallydrivenbysubsidycostsrelatedtostu-dentloans•TheyalsoforecastpositivenetT-billissuancethroughoutthemonthofAugust,beforecuttingshorter-maturityauctionsizesinearly-SeptemberagainstasurgeintheTGAaroundthecorporatetaxdate•Atnextweek’sFOMCmeeting,oureconomistanticipatesthattheFedwillleavepolicyratesunchanged,andcontinuestoexpectthefirstratecutinSeptember,followedbyquarterlyreductionsthereafter•Reservesarestillabundantinouropinion.Therecentvolatility/elevatedlevelswithSOFRisaproductofmarketfrictionsandinefficienciesintherepomarkets.TheoddsthattheFedwillhavetoendQTprematurelyarelow•TherecentstickinesswithONRRPshouldfade.BalancescoulddeclinemoreasnetT-billissuanceturnspositivein2HandaswegetfurtherclarityaroundtheFed’seasingcycle.ThesefactorsshouldprovidemoreliquiditysupplytoMMFsandonthemargincheapenT-billvaluationsandallowMMFstoextend•BesidesMMFs,GSEsandbanksarealsosignificantprovidersofliquiditythatcanpolicerepora...