J.P.Morgan Have Slightly Bullish Bias For Futures Roll

Ahead of the JGB futures roll J.P.Morgan note that “foreign investors have covered shorts lately, bringing back their net positioning to more normal levels. However, given price actions and a series of events that unfolded after the latest data release such as Fed Chairman Powell’s speech at the Jackson Hole economic symposium, we envisage that foreigners’ net short positions have increased meaningfully. Foreign investors may do long rollovers or may simply cover shorts on the back of recent rates movements. In either case, we think that it will give a bullish bias to the calendar spread.”

• “From a scarcity perspective, investors are arguably more inclined to deliver short futures positions after this rollover. However, we think that is appropriately reflected in the repo rates. We consider the CTD spread to be neutral for the calendar spread.”
• “We believe that the market has priced in short rollovers to a certain extent already. However, we envisage that foreign investors’ positioning will be the key driver. Against this backdrop, we hold a slightly bullish bias on the calendar spread. Considering all factors, we forecast that the trading range of the calendar spread will be 55sen to 68sen.”