Trade note: Short 10Y Italy vs. France

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Trade note: Short 10Y Italy vs. France

J P M O R G A N Global Markets Strategy

17 June 2026

Trade note: Short 10Y Italy vs.

France

We recommend entering short 10Y Italy vs. France as an attractive, carry- Rates Strategy

ACefficient risk-off proxy and a tactical way to position for potential increased Aditya Chordia

Italian political noise around budget negotiations in the Autumn. Following (44-20) 7134-2132

the recent risk-on move, Italian spreads have tightened sharply relative to French aditya.x.chordia@jpmorgan.com

spreads, broadly in line with the recent empirical relationship (Figure 1Werecomendshort10YItalyvs.Franceasanatractive,cary-eficientrisk-ofproxyandatacticalwaytopositionforpotentialItalianpoliticalnoisearoundbudgetnegotiations, 10Y Italy- Matteo Mamprin

Germany spread has moved with ~200% beta to the 10Y France-Germany spread). (44-20) 7134-0329

After the recent risk-off tightening move following the MOU announcement and matteo.mamprin@jpmorgan.com

J.P. Morgan Securities plc

lower energy prices, we believe the good news is mostly in the price, i.e. the market

is already broadly pricing a durable peace deal leading to a gradual re-opening of

the Strait of Hormuz scenario. At current levels, as discussed in our 2H26 Outlook,

we expect investors to be relatively more cautious on carry exposures than in the

pre-war environment, particularly given the sharp deterioration in risk-adjusted

carry. We therefore see limited room for further spread tightening from here and

expect the summer carry theme to result in more steady spreads rather than ongoing

spread tightening. In a risk-off move, Italy should be the relative underperformer,

consistent with the recent relationship. Also, as discussed in our 2H26 Outlook, we