J.P.Morgan Remain Neutral On Breakevens Post-CPI

In the wake of the June CPI report J.P.Morgan note that “5-Year TIPS carry should remain firmly positive in the month of August. As our economists have pointed out, we could see continued strength in the shelter component this fall, even while other components moderate, as elevated new lease prices filter into the composite number. Against this backdrop, we remain neutral on breakevens: though valuations are cheap and we see upside risks for inflation, we continue to think that those surprises will be met by higher policy rate expectations that should limit the potential for breakeven widening over the near term.”