Short-Term Fixed Income: An extra step adds up

Research evidence excerpt

Pankaj Vohra AC (1-212) 834 5292

J.P. Morgan Securities LLC

Molly Herckis (1-212) 622-0899

J.P. Morgan Securities LLC

Global Markets Strategy

JPMORGAN

07 August 2026

Short-Term Fixed Income

An extra step adds up

Despite the significant increase in non-financial CP supply this year—with total outstandings up $125bn YTD—demand appears sufficient, as CP/T-bill spreads remain

below their YTD midpoints

With Tier 1 non-financial CP yields near YTD highs and the 1m/3m curve near the top

of its YTD range, we view 3m Tier 1 non-financial CP as attractive into an expected

December hike, offering a notable pickup versus 1m

In the Quarterly Refunding Announcement, one TBAC charge question focused on

intraday repo, noting it could improve short-term liquidity management, reduce bottlenecks and funding-squeeze risk, and provide investors a new channel to deploy idle

balances

While today’s intraday repo volumes remain de minimis by our estimates, the TBAC

presentation suggests the latent need could be meaningfully larger, to the tune of

~$385bn potentially migrating to intraday repo if the market scales

The economic implications of engaging in intraday repo could be notable; this could

more evenly distribute reserves within the banking system on an intraday basis

The TBAC minutes showed primary dealers’ thoughts on investing excess cash into the

repo markets and whether or not it would be better for Treasury’s cash balance to sit in

the TGA or in repo: most primary dealers were optimistic that Treasury parking a small

portion of its cash in the repo markets would at least modestly ease any funding constraints...

...in practice, however, this is far from straightforward, and from a consolidated economic perspective, the value depends on the TGCR/IORB spread net of transaction

costs, and that spread can vary across different reserve regimes

Near-term catalysts: CPI (8/12), PPI (8/13), Retail Sales (8/14)

Market commentary

The closely watched July employment report came in materially softer than consensus, raising some concern around labor-market momentum and slightly dialing back market-implied odds of a September rate hike (though September was not our base case).…