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J.P.Morgan Suggest 10-Year Yields Look Too Low

US TSYS

J.P.Morgan suggest that “10-Year yields currently appear 30bp too low after controlling for growth, inflation, and Fed policy rate expectations, as well as the expected time to Fed liftoff. Notably, this divergence remains as large as occurred over the summer around the onset of the Delta variant outbreak in the U.S., which resulted in a large round of short covering. Thus, it’s possible that this latest move could indicate position technicals are cleaner. Indeed, our latest Treasury Client Survey, taken two weeks ago, showed some position squaring prior to the holidays, and we will be keenly watching our next survey, due out tomorrow. Moreover, it appears more momentum-driven investors have liquidated longs recently as well: CTA exposure to Treasuries had turned neutral late in 2021, and it’s possible this move represents a new set of bearish positions as well.”

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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