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US TSYS: J.P.Morgan Lean Against Extension Of Recent Sell Off

US TSYS
Bullet

Late Tuesday J.P.Morgan wrote “Treasuries have underperformed their fundamental drivers. 10-year Treasury yields appear 27bp too high after controlling for the market’s medium-term Fed policy, inflation, and growth expectations, as well as the Fed’s footprint in the Treasury market.”

  • “This divergence is more than 1 standard deviation as well, though we note yields have decoupled (from their drivers) by more than 30bp at least three times in the last two years.”
  • “While momentum can continue to push yields higher if we see an upside CPI surprise this week, both positioning and valuations should act as a support to Treasuries, limiting the scope for a further backup from current levels.”
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Late Tuesday J.P.Morgan wrote “Treasuries have underperformed their fundamental drivers. 10-year Treasury yields appear 27bp too high after controlling for the market’s medium-term Fed policy, inflation, and growth expectations, as well as the Fed’s footprint in the Treasury market.”

  • “This divergence is more than 1 standard deviation as well, though we note yields have decoupled (from their drivers) by more than 30bp at least three times in the last two years.”
  • “While momentum can continue to push yields higher if we see an upside CPI surprise this week, both positioning and valuations should act as a support to Treasuries, limiting the scope for a further backup from current levels.”