J.P. Morgan Market Watch

Research evidence excerpt

J.P. Morgan Market Watch

his week: IG and HY spreads

sive, and we think any material repricing higher will likely tightening 3bp and 14bp respectively, despite risk-off signals

bear-flatten the money market curve, keeping intermediate elsewhere. Volatility was evident as Brent rose $4.5/bbl on

yields rangebound. In the UK, the market now prices ~42bp renewed Middle East tensions, 10y Bund yields climbed

of cumulative BoE tightening. Despite Iran-related uncertain- 13bp, and the Eurostoxx 50 fell 2.2%. The outperformance

ty, we see little scope for the curve to price beyond 50-55bp likely reflects spreads absorbing part of the rates selloff,

of hikes, given limited energy tail risks. This, plus 10Y yields helped by supportive seasonal technicals. Primary supply

5bp above their 3m average, leads us to enter tactical longs in stayed light (US holiday + quarterly blackout). Euro IG issu-

10Y gilts, targeting 4.75-4.80%. In Japan, yields rose mid- ance slipped to €13bn (largest: TenneT €3.5bn), while Euro

week on fiscal concerns and pushback against further BoJ HY edged up to €3.1bn (led by Loxam €1.1bn) (European

hikes, but reversed after FinMin Katayama backed BoJ inde- Credit Weekly, Jul 10th).

pendence and domestic pension (e.g., GPIF) investment,

sparking a rally in the 10-20y sector (GFIMS, Jul 10th). Figure 1: Year-to-date returns

%

In EM, we remain MW rates overall, with OWs in Hungary, MSCI Korea ($) 90

Colombia, Mexico and Paraguay offset by UWs in Thailand, S&P500RussellMomentum2000 20 28

Chile and Peru. Meanwhile, our EM Client Survey shows that MSCI EM Topix(in $) 1819

EM sovereigns saw bullish additions as investors added more S&P500CommoditiesQuality 1718

bearish exposure in EM corporates and currencies, while EM ConvertiblesNasdaq 1216