J.P.Morgan Recommend 10-/30-Year Steepeners

J.P.Morgan note that "one would expect the curve to flatten as the time to the Fed liftoff draws closer, as expectations of earlier and more aggressive tightening tend to flatten the curve. However, we think the curve has run ahead of these more hawkish Fed expectations."

• "The 10s/30s curve appears more than 10bp too flat after adjusting for 2-year Treasury yields (as a proxy for Fed expectations), TIPS breakevens (as a proxy for inflation expectations) and the Fed's asset purchases, using data over the last 2 years. Moreover, the TGA is set to rise markedly once the debt ceiling is resolved, and this dampener on Fed asset purchases should steepen the curve."
• "We recommend adding tactical 10-/30-Year steepeners at 53.6bp. One-month weighted carry is 1.9bp and roll is 2.7bp."