J.P.Morgan Adjust Tsy Yield Forecasts

J.P.Morgan have adjusted their Tsy yield forecasts in light of their recent adjustment to their FOMC view. They have raised their 2-Year forecasts by 55bp to 2.90% by year-end and revised their 10-Year target 35bp higher to 2.85% over the same horizon.

• They note that the forecasts project “10-Year yields retracing to the levels where they traded in late-2018, and imply a yield curve that inverts end to end by later this year. Certainly, an inverted curve does indicate the expansion has hit a more mature point, but structural factors, namely lower neutral policy rates, the Fed’s outsized share of the Treasury market, and robust LDI demand, all make it easier for the curve to flatten at lower rates levels than at other points over the last 2 to 3 decades. Thus, it’s more difficult to gauge the health of the economy using the broad curve than at other points in recent history, and we prefer to instead watch the front end to assess recessionary risks.”