Interest Rate Derivatives: Turkish (soccer) delights

Research evidence excerpt

Interest Rate Derivatives: Turkish (soccer) delights

Ipek Ozil AC (1-212) 834-2305 Emre Alptuna (1-212) 270-4843 Global Markets Strategy J P M O R G A Nipek.ozil@jpmorgan.com emre.alptuna@jpmorgan.com

J.P. Morgan Securities LLC J.P. Morgan Securities LLC 26 June 2026

Chris Hayward (1-212) 622-6152

chris.hayward@jpmchase.com

J.P. Morgan Securities LLC

Interest Rate Derivatives

Turkish (soccer) delights

• Implied distributions have continued to shift hawkishly on the back of the FOMC meet-

ing despite positive developments in the Middle East and a significant decline in the

price of oil; at present, the market-implied probability of one or more hikes by year end

is almost 70%

• With the hawkish repricing of Fed expectations during the conflict, payer skew has

richened, and receiver skew has cheapened. The implied distribution for Dec ‘26 SOFR

continues to exhibit a heavy right tail, whereas our economists expect the Fed to remain

on hold through year end. Therefore, payer skew in shorter expiries and tails may be

capped, while the left side of the distribution could potentially open up if data disap-

points, richening the receiver skew...

• ...sell 1Yx1Y A+50 payer swaptions versus buying 1Yx1Y A-50 receiver swaptions,

delta hedged daily

• We remain neutral on shorter-expiry implieds, as they are near our year-end targets, but

the 5Yx5Y point appears to offer relative value...

• ...buy 5Yx5Y straddles versus a vega-neutral amount of 5Yx2Y straddles

• Term funding premium is only slightly above our estimate of fair value; we thus remain

neutral on the swap spread curve

• Over the past month, long-end swap spreads have almost fully decoupled from the price

of oil; for this reason, we recommend unwinding swap spread trades designed to be

insensitive to oil