JPM analysts Jay Barry and Jason...>

US TSYS/RESEARCH: JPM analysts Jay Barry and Jason Hunter said near-term and

into 2018, "there is significant room for the curve to flatten as distinct

factors will drive the front end and long end. At the front end, we expect the

Fed to tighten four times in 2018, excess reserve balances to decline by $575bn,

and most of the $1.3tn in net Tsy issuance we project is likely to be focused in

T-bills" and 2-yr to 5-yr notes. Such "factors should help drive yields in the

2- to 5-yr sector well above the forwards," they said.

- They also eyed long end factors as "weaker potential growth suggests" neutral

FFR "is significantly lower than levels in the last tightening cycle", so may

"act as somewhat of an anchor on long-term yield. That being said, we have been

hesitant to add flatteners, as the curve had run ahead of its fundamental

drivers."