JPM High-Yield and Leveraged Loan Morning Intelligence

Research evidence excerpt

JPM High-Yield and Leveraged Loan Morning Intelligence

--Overnight Price Action: S&P Futures are up 50bp overnight with Brent tumbling $4 to $84 and 10yr

Treasury yields sliding 5bp off a 18-month high amid optimism around US/Iran diplomacy as Trump called

off a planned strike to resume talks (link). Today’s macro calendar includes Manufacturing PMI/ISM at

9:45/10am with investors continuing to focus on earnings. This week’s most important macro catalyst

will be the July’s employment report on Friday where our economists expect a moderate 75k increase

with a likely temporary rebound in the unemployment rate from 4.2% to 4.3%. The other major catalyst is

Wednesday’s quarterly refunding announcement where our colleagues expect no changes to nominal

coupon auction sizes and no change to the buyback program, as Treasury remains well funded through

FY26. Other data this week include Tuesday’s JOLTS and Wednesday’s ADP report and Services

PMI/ISMs alongside 5 Fed speakers. And following last week’s curve steepening which reflected Fed

credibility concerns, our rates colleagues see room for further steepening over the near term, driven by

rising inflation expectations and rising term premium. Now expecting the first rate cut in December

(which is aligned with OIS), our rates colleagues raised their 2, 5, 10, and 30yr YE26 Treasury yield

forecasts to 4.30% (from 4.20%), 4.45% (from 4.40%), 4.85% (from 4.70%) and 5.40% (from

5.20%), respectively (link). With 307 S&P co. reporting for 2Q, EPS growth (+58.8% y/y vs +28.8% 1Q)

and revenue trends (+14.8% vs +11.7% 1Q) are ahead of consensus (+22% EPS, +12% Sales).

This Morning’s Headlines and Highlights

--Trump Pivots Back to Diplomacy as Iran Victory Eludes Him; WSJ

--OPEC+ Makes Small Quota Hike to Finish Unwinding 2023 Cuts; BBG