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J.P.Morgan Adjust Yield Forecasts

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Late Monday saw J.P.Morgan note that “last week, our colleagues in economics revised their Fed forecast: they now project 50bp hikes at the next 2 FOMC meetings in June and July, before stepping down to a pace of 25bp hikes, leaving the Fed funds target back in the 3.00-3.25% range by March 2023. We refrained from making forecast changes at the time, as the volatility post-FOMC indicated that technicals were at work just as much as fundamentals. Volatility has not subsided at all, but we make adjustments to our forecast to reflect a Fed that will raise rates more quickly and to a higher terminal rate than in our prior forecast. We raise our 2-Year forecast by 25bp to 3.15% by year-end, and revise our 10-year target 35bp higher to 3.20%. While the moves are somewhat large relative to changes in our Fed forecast, it also incorporates expectations that the market will price in the Fed’s terminal rate months prior to our final projected hike early in 2023.”

MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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