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J.P.Morgan: Position For Narrower Spreads In 10-Year Sector

US SWAPS

Late on Friday J.P.Morgan noted that “dynamics between MMFs and Reserves have an impact on swap spreads. Elevated RRP balances have the potential to alter the interest rate characteristic of deposits as banks may have to increase their deposit rate betas, and an increased deposit beta would result in diminished capacity for interest rate risk, and thus diminished bank demand for securities. Diminished bank demand for USTs should bias spreads narrower, and intermediate maturity spreads tend to narrow heading into the x-date.”

  • Their subsequent recommendation to enter 10-Year swap spread narrowers came with 10-Year swap spreads trading at -29.2bp.
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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