J.P.Morgan Recommend 30-Year Breakeven Narrower

J.P.Morgan write “despite the modest narrowing in breakevens over recent weeks, 30-year breakevens still trade near multi-year wides, and the curve remains remarkably steep. The sector continues to appear roughly 20bp too wide on a cross-market basis.”

• “We now think the case for initiating 30-year breakeven narrowers is more compelling. Economic data leave us feeling more confident that the economy is slowing and inflation data should show further progress later this year.”
• “Meanwhile, recent Fedspeak highlights the asymmetric risk distribution for breakevens: Fed officials this week noted that if inflation expectations continued to rise, the Fed may need to respond, and Powell reiterated a tightening bias.”
• “With US inflation markets outperforming versus HICP swaps in the 15Yx15Y sector in recent weeks, the long end of the curve looks far less cheap on a cross-market basis.”
• They recommend initiating 30-year breakeven narrowers at 247.3bp.