Global Markets Strategy: Carry on into the summer

Research evidence excerpt

Global Markets Strategy: Carry on into the summer

Francis Diamond AC (44-20) 7134-1504 Global Markets Strategy J P M O R G A Nfrancis.diamond@jpmorgan.com

J.P. Morgan Securities plc 26 June 2026

Elisabetta Ferrara (44-20) 7134-2765

elisabetta.ferrara@jpmorgan.com

J.P. Morgan Securities plc

Overview

Carry on into the summer

• DM yields extended the post US-Iran MoU rally this week as declines in energy

prices are easing inflation concerns, although US rates continued to underperform

after the recent hawkish Fed shift.

• We continue to think that European yields are likely to remain range-bound. We

expect carry to be a key theme for the coming months given our view of range-

bound European yields amid a backdrop of moderating volatility and usually

lighter market activity through the summer.

• Looking at previous summers, we find evidence that summer carry works as a

theme in Euro rates, but caveats apply. Intra-EMU/€-SSA spreads do not histori-

cally exhibit a clear tightening pattern in summer; given the ongoing risks from the

Middle East conflict, we don’t think intra-EMU/€-SSAspread carry can provide

sufficient cushion against potential risk-off widening. Instead, we find evidence of

seasonal widening into the summer period, especially in German swap spreads. In

the current environment, we see value in carry trades across money markets, swap

spreads and volatility.

Over the past week, DM yields extended the rally (Figure 1ThiswekDMyieldsextendedtheralythatstartedaftertheanouncementoftheMoUagrementbetwentheUSandIran.) that started after the announce-

ment of the MoU agreement between the US and Iran as continued declines in energy prices

have reduced concerns over inflation (Figure 2…amidfurtherdeclinesinenergyprices,especialyoil).