Treasuries: Curb your enthusiasm

Research evidence excerpt

Jay Barry AC (1-212) 834-4951

J.P. Morgan Securities LLC

Harry Downie (1-212) 270-9500

J.P. Morgan Securities LLC

Amanda Berke (1-212) 834-5739

J.P. Morgan Securities LLC

Global Markets Strategy

JPMORGAN

07 August 2026

Treasuries

Curb your enthusiasm

With labor market concerns easing and the Fed moving back to a neutral bias, this should

keep yields rangebound over the near term, though we believe risks skew toward pricing

more Fed tightening over the medium term...

...We also see risks to longer-term yields, as Chair Warsh’s comments on balance sheet

and the Fed’s inflation target both leave risks to higher inflation expectations and term

premium over the medium term...

...Combining these views, we think the near-term environment favors positive carry

steepeners: maintain 2s/10s curve steepeners

Treasury left “at least” in forward guidance, but changed the statement from evaluating

“potential future increases to nominal coupon and FRN auction sizes” to “potential

future changes”...

...Taken at face value, this shift would indicate there are two-sided risks to Treasury

auction sizing over the medium term, which we find curious given broad funding gaps

in FY27 and beyond, as well as TBAC’s belief that current projections could warrant

increases in coupon issuance in FY27...

...We think Treasury is somewhat uncomfortable with the recent rise in Treasury yields,

and this subtle guidance shift is aimed at opening up ambiguity in this distribution to

reduce bearish pressure

We now expect Treasury to maintain its forward guidance into 2027 and to maintain

current auction sizes through August 2027 (versus February 2027 previously)

P-STRIPS outstanding rose by $5.9bn in July, dispersed more along the curve than in

prior months. This came in line with the 3-month average, and we continue to expect

LDI demand for Treasuries will continue at a more muted pace this year

Market views

Yields reversed course this week, supported by positive geopolitical news and dovish developments on both the macroeconomic and debt management fronts. Reports of renewed

negotiations between the US and Iran drove oil lower and provided a tailwind for Treasuries

…