JPM sees the NYFed keeping the pace of Tsy......>

FED: JPM sees the NYFed keeping the pace of Tsy purchases unchanged next week at

$5bln on average daily - compared with a $1bln tapering in each of the last 3

weeks. NYFed announcement is expected at 1400ET.

- There is room for reducing the pace, as tapering so far "has not appeared to

have a material impact on longer-term yields", and market functioning continues

to improve. However, the Fed may not want to slow further, for several reasons.

- First, there is likely a need for further monetary accommodation, as per April

FOMC minutes, and JPM says the Fed isn't ready "to step away from QE until it is

clear the labor market path is on sustainably firmer footing than it is now".

- The implied $100bln/month pace(at $25bln/week) would be larger than previous

QE programs, but is roughly the right size now given explosion in Tsy issuance

since QE3.

- Fed market participant surveys look for $100bln/month to year-end.

- There was no taper in MBS purchases last week ($4.5bln daily); in QE3 Fed

bought Tsys at 1.1x ratio to MBS, equivalent of $5bln now - so we may already be

in 'steady state' territory.