Tags: jpmorgan | treasury | yields | 1995

JPMorgan: Treasury Yields to Surge in 1995 Cycle Replay

JPMorgan: Treasury Yields to Surge in 1995 Cycle Replay
(Larry Metayer/Dreamstime)

Monday, 04 November 2019 08:52 AM

Treasury 10-year yields may surge while stocks grind higher over the next six months after the Federal Reserve’s third interest-rate cut, according to JPMorgan Chase & Co.

The market reaction to the Fed’s “insurance” rate cuts has been most akin to a similar path taken in the mid-1990s, JPMorgan strategists said.

“Assuming markets continue to follow the trajectory of the 1995 mid-cycle episode, this implies modest 5% or so upside for equities over the next six months, very big 100 basis point upside in the 10-year U.S. Treasury yield, steepening of the UST curve, and little change in the dollar or credit spreads,” strategists led by Nikolaos Panigirtzoglou wrote in a note Friday.

The prediction comes with some big caveats, though.

It assumes that the U.S. macro picture remains consistent with a mid-cycle adjustment, with resilience in employment and consumer confidence, as well as a rebound in manufacturing, JPMorgan said. It would also require a reversal of the pattern that has seen retail investors buy bond funds and sell equity funds at an unusually heavy level, and a re-steepening at the front end of the U.S. forward curve.

Investors should monitor the gap between the one-month USD-OIS rate two-years forward minus the equivalent one-year forward. That “would need to enter positive territory on a sustained basis from here for us to be confident that the mid-cycle adjustment thesis is tracking,” the strategists wrote.

© Copyright 2020 Bloomberg News. All rights reserved.


   
1Like our page
2Share
StreetTalk
Treasury 10-year yields may surge while stocks grind higher over the next six months after the Federal Reserve's third interest-rate cut, according to JPMorgan Chase & Co.
jpmorgan, treasury, yields, 1995
233
2019-52-04
Monday, 04 November 2019 08:52 AM
Newsmax Media, Inc.
 
Newsmax TV Live

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved