J.P.Morgan recommend taking profits of 10-/30-Year Flatteners

J.P.Morgan think “it’s a prudent time to unwind tactical 10s/30s flatteners. Last week we had recommended adding exposure, as the long end had steepened in excess of the market’s medium-term Fed policy and inflation expectations. Over the interim period, the long end has flattened 9bp: though it’s not inverted like other curve pairs, 10s/30s only managed to invert for a handful of days during the tightening cycle. Moreover, the curve has flattened somewhat relative to its drivers as well. Thus, with tomorrow’s labor market data likely to support a slower pace of hikes, markets pricing in a terminal Fed funds rate above 5%, and 60bp of hikes at the December FOMC meeting, we recommend taking profits.”