Global Fixed Income Markets Weekly: Geopolitics headline watching and summer seasonals

Research evidence excerpt

J P M O R G A N

Global Markets Strategy

07 August 2026

Global Fixed Income Markets

Weekly

Geopolitics headline watching and summer seasonals

Overview: US and European yields rallied 5-15bp over the past week driven

by easing energy prices on renewed de-escalation in the Middle East,

reinforced by a downside surprise in the July US labour market report, although

the unemployment rate ticked lower. In the US, the August refunding

announcement was also in focus. Japanese yield curve twist flattened more

than 15bp amid reports of a co-ordinated US-Japan yen-buying intervention.

In Europe, yields continue to be mainly driven by developments in energy

markets although sensitivity to energy has recently diminished. Given the

recurring patterns of de-escalation and re-escalation, we remain wary of the

ongoing geopolitical uncertainty, and with European yields now close to the

middle of recent trading ranges, we maintain a cautious stance. We provide an

update on our views on 5s/30s DM curves. Looking at a simple valuation

framework, the term premium priced in the 5s/30s UST curve has recently

risen, although current levels do not look excessive once we control for frontend policy rate expectations and volatility. We think this is justified as market

pricing of some term premium in the US curve is consistent with growing

concerns over Fed credibility, yet the yen intervention and the tweak in

refunding guidance this week both signal the Treasury's discomfort with the

recent rise in UST yields, acting as a counterweight. The cross-market beta

(and correlation) of 5s/30s Bund and gilt curves to moves in the 5s/30s UST

curve has remained subdued over the past few months and has only modestly

risen amid the recent post-Fed developments, as concerns over Fed credibility

are a US-specific dynamic. 5s/30s EUR and GBP curves have recently shown

increased negative directionality to front-end yields, similar to what was

observed at the start of the Middle East conflict, while the sensitivity of the UST

5s/30s curve to 1Yx1Y SOFR remains subdued.

Euro: Stay long 10Y Germany and OW 10Y Germany vs. US. Remain

cautious on intra-EMU/€-SSA spreads carry exposures. Post-summer spread

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