JPM Recommend Unwinding Shorts In 2s & New Longs In 5s

J.P.Morgan think "Treasury yields are somewhat mispriced at current levels. Earlier this month we argued it would be challenging for 2-year yields to decline below the interest on reserves, as this had proven to be a relatively strong floor the last time policy rates were at the effective lower bound a decade ago. Moreover banks have a larger marginal role in setting prices at the short end of the curve than they did in that era and were expected to shorten duration and maintain yield by substituting short-end Treasuries with reserves. As a result we recommended short positions in 2-year notes. However, with the moves in markets over the last few days and current Fed pricing, we recommend unwinding shorts in 2-year Treasuries. Furthermore, while our forecasts look for higher yields and steeper curves from current levels, we think the latest move presents a short-term opportunity to add duration. Along the curve, with the market now pricing a full hike by 1Q23 and over 50bp of hikes by early 2024, we think there is value in intermediate Treasuries and recommend tactical longs in 5-year notes (reference yield: 0.796%)."