Global Markets Strategy

Research evidence excerpt

Global Markets Strategy

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 17 July 2026

Elisabetta Ferrara (44-20) 7134-2765

elisabetta.ferrara@jpmorgan.com

J.P. Morgan Securities plc

Overview

Still cautiously long European duration

• European yield curve bear flattened this week driven by another drift higher in

energy prices, particularly natural gas, while US yields outperformed with a 5bp

bull steepening of the curve and JGBs rallied beyond the 5Y sector as market

focused on the strong 20Y auction and discussions around GPIF allocation chang-

es.

• The probability distribution around the Dec26 central bank meeting is showing

relatively fat tails for Fed and BoE, highlighting decent uncertainty around the

path of rate hikes whereas the ECB is seen as being more firmly on a hiking path.

Next week, the ECB is widely expected to stay on hold likely reiterating the data-de-

pendent guidance while retaining a tightening bias. With the market already pric-

ing in a peak of more than 50bp of cumulative hikes, we think a hawkish surprise

from ECB is unlikely. We see the next hike in September.

European yield curves bear flattened this week with 8-10bp front-end sell-off driven by the

drift higher in energy prices, particularly natural gas. US yields outperformed with a 5bp bull

steepening of the curve given a decent downside surprise in the June CPI print. Finally, in

Japan, JGB yields rallied around 5bp beyond the 5Y sector amid a strong 20Y auction and

as discussions on GPIF allocation took centre stage. Discussions surrounding GPIF's asset

allocation are likely to remain an important market theme in Japan. It is still unclear if a