J.P.Morgan Remain Neutral On Duration, Not Surprised By Tuesday’s Move

In lieu of Tuesday’s price action J.P.Morgan note that “overall, we are not surprised to see Treasuries reversing their recent moves, as yields had run ahead of fundamental drivers and appeared nearly 30bp too low yesterday, and even after today’s selloff, yields remain about 20bp too low relative to our fair value model. Against this backdrop, we think there is further room for yields to rise from here, though we are hesitant to initiate shorts ahead of Thursday’s CPI report, especially as low risk appetite and poor market liquidity could exacerbate volatility over the near term. Notably, our latest Treasury Client Survey released today shows that while short positioning has been paired back over the past week, while the share of neutrals remains near its highest level of the past 15 years. Thus, we remain neutral on duration for now.”