J.P.Morgan Remain Broadly Neutral On BEIs Ahead Of CPI

J.P.Morgan suggest that if Tuesday’s CPI report shows “the year-ago inflation rate rising to new multi-decade highs and contains details that continue to show broad-based strength outside of energy prices, we could see renewed demand for inflation protection from non-traditional TIPS investors, allowing inflation risk premium to rise along the curve, especially given the recent cheapening of the product. However, we think that a strong CPI report would ratify expectations that the Fed is set to embark on a series of 50bp hikes, which should make it challenging for breakevens to richen materially. Thus, against this backdrop, we remain broadly neutral breakevens at current levels.”