Treasuries: Life, Liberty, and the pursuit of hawkishness

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Treasuries: Life, Liberty, and the pursuit of hawkishness

Jay Barry AC (1-212) 834-4951 Liam L Wash (1-212) 834-5230 Global Markets Strategy J P M O R G A Njohn.f.barry@jpmorgan.com liam.wash@jpmchase.com

J.P. Morgan Securities LLC J.P. Morgan Securities LLC 26 June 2026

Harry Downie (1-212) 270-9500 Amanda Berke (1-212) 834-5739

harry.j.downie@jpmorgan.com amanda.berke@jpmorgan.com

J.P. Morgan Securities LLC J.P. Morgan Securities LLC

Treasuries

Life, Liberty, and the pursuit of hawkishness

• Another strong month of job growth could lower the bar for markets to price in further

tightening, particularly given front-end yields at local lows, and we see risks markets

could price in more tightening over the next year...

• ...Moreover, the intermediate sector has underpriced this risk: 10-year yields are trading

27bp below their model-implied fair value, the largest divergence since March 2023,

leaving the risk for Treasury yields skewed higher over the medium term

• However, rebalancing dynamics leave room for yields to decline over the coming week:

over the last decade, yields have tended to decline into quarter end after similar periods

of equity outperformance relative to fixed income. This dynamic supports patience in

entering outright duration shorts

• Many Fed members have called into question the restrictiveness of the current policy

stance. Various measures of the real neutral rate suggest that, absent a reduction in infla-

tion, a mid-cycle adjustment entailing 50-100bp of tightening in policy rates would be

required to re-assert a restrictive stance

• We examine the two 1990s-era mid-cycle hiking adjustments analogous to the current

situation, and find 1999-2000 to be the better analog to today, specifically the tightening