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J.P.Morgan Recommend Positioning For Steeper 10s/30s Swap Spread Curve

US SWAPS

J.P.Morgan note that they "now recommend positioning for a steeper 10s/30s maturity matched swap spread curve. The strength in the equity markets mitigates the interest rate risk in variable annuities, and relieves the insurance company receiving pressures that have historically impacted long end spreads. In addition, the spread curve is positively correlated to long end yields. Although the spread curve appears fair adjusted for yields and equities, given our bias towards higher yields in the medium-term end, as well as our expectation of stable/strong equity markets, we now recommend positioning for a widening in 30-year swap spreads relative to 10-year maturity matched swap spreads. Carry on this trade is net flat over a 3-month horizon."

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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