J.P.Morgan: Long ’25 Breakevens

J.P.Morgan note that “the front-end of the ACGBi breakeven curve should be biased higher in the context of the RBA’s gradual approach, resumption of the fuel price impulse and Australian inflation.”

• “The curve has shifted modestly lower in the past month with the weaker than expected July monthly CPI indicator offsetting the more constructive global growth narrative.”
• “We expect inflation to slow, but with services inflation to normalize only gradually, front breakevens and FX-adjusted Brent should not have diverged to this extent.”
• “Given the mechanical influence of higher domestic fuel prices on CPI near-term, enter a long in the 2025 ACGBi breakeven.”
• The recommendation came with the measure trading at 2.97%.