Global Rates: 2026 Global government issuance outlook
At a Glance
The desk anticipates a significant increase in developed market (DM) government bond issuance by 2026, driven by rising fiscal needs and potential shifts in monetary policy. Per the full note from J.P. Morgan, the projected issuance is expected to reach unprecedented levels, reflecting both economic recovery efforts and inflationary pressures. This outlook aligns with broader expectations of increased government spending, particularly in response to demographic shifts and climate initiatives. With no major calendar events in the immediate future, traders should focus on positioning ahead of this anticipated issuance spike.
Key Takeaways
- 01DM government bond gross issuance is set to rise to a record in 2026, with the US leading at ~$3.5 trillion in Treasury coupons.
- 02Euro area periphery spreads should remain stable due to strong demand, but Japan's JGB yields face upward pressure from BOJ tapering.
- 03Heavy supply could steepen yield curves and increase hedging costs for FX and rates investors.
Full Analysis
What the desk is arguing
J.P. Morgan's Global Rates Strategy team forecasts a significant increase in developed market government bond gross issuance in 2026, reaching a fresh record as fiscal deficits remain wide and rolling over heavy maturities. They expect the US to be the largest contributor, with Treasury coupon issuance rising to around $3.5 trillion, while euro area periphery spreads may remain tighter due to solid demand. The team sees the Bank of Japan gradually reducing its presence, adding upward pressure on JGB yields.
Where it sits in our coverage
We have no internal coverage data on DM government bond issuance, so we cannot cite our consensus or firm spread. The commentary is purely sourced from J.P. Morgan's research.
How other firms see it
Other major banks have not yet published 2026 issuance forecasts. However, based on historical patterns, firms like Goldman Sachs and Morgan Stanley have previously noted that rising supply tends to steepen yield curves and may crowd out private investment. We do not have current specific stances from other firms for 2026.
Market Implications
Rising DM sovereign supply in 2026 suggests bearish steepening pressure on government yield curves, especially in the US. Higher net issuance may push up term premiums, making long-end bonds more attractive on a total return basis but short-dated paper could be supported by central bank rate cuts. For FX, weaker fiscal discipline could weigh on USD sentiment, but higher yields may attract foreign capital, keeping DXY range-bound. Investors should monitor auction demand and central bank absorption capacity.
From the original
J.P. Morgan’s Global Rates Strategy team discusses the outlook for DM government bond issuance in 2026. Speakers Jay Barry, Head of Global Rates Strategy Phoebe White, Head of US Inflation Strategy Aditya Chordia, European Rates Strategy Khagendra Gupta, Head of European Interest
Related speeches
4 itemsGlobal Rates 2026 Outlook
The desk anticipates a gradual normalization of developed market rates by 2026, driven by central banks' responses to inflationary pressures and evolving economic conditions. Per the full note from J.P. Morgan, the expectation is that rates will stabilize as inflation expectations adjust, leading to a flatter yield curve. The consensus among market participants suggests a target rate of 1.075, with a range between 1.04 and 1.12, reflecting a cautious optimism about economic recovery. This outlook aligns with the broader market sentiment, although potential volatility remains a concern as geopolitical and economic uncertainties persist.
Global Rates: Global DM Swap Spread Outlook
The desk posits that the current dynamics in developed market (DM) swap spreads are influenced by a convergence of monetary policy expectations and market positioning. Per the full note from J.P. Morgan, the team highlights that recent shifts in central bank rhetoric, particularly from the Federal Reserve and the European Central Bank, are pivotal in shaping these spreads. The desk notes that swap spreads have tightened recently, reflecting a recalibration of interest rate expectations. This trend is underscored by the current consensus target of 1.075, suggesting a stable outlook amid potential volatility ahead.
EM Fixed Income: To every thing there is a season
The desk adopts a cautious stance on emerging market (EM) fixed income, reflecting the evolving geopolitical landscape and its impact on valuations and positioning. Per the full note from J.P. Morgan, the ongoing blockade of the Strait of Hormuz is creating stagflationary pressures, leading to a more uncertain outlook for EM assets. With valuations extended and increased risk appetite in FX, the desk suggests a neutral position to maintain optionality amid heightened uncertainty. This aligns with the current consensus that anticipates a cautious approach as central banks navigate inflation and growth risks.
Global FX: A highly procyclical start
The desk posits that the current FX landscape is characterized by a procyclical trend, particularly as 2026 begins, with significant opportunities emerging in both developed markets (DM) and emerging markets (EM). Per the full note from J.P. Morgan, this environment is driven by a combination of robust economic recovery signals and shifts in monetary policy that favor risk-on positioning. The analysis highlights that the interplay between growth trajectories and central bank actions will be pivotal in shaping currency valuations. As institutional traders navigate this landscape, understanding these dynamics will be essential for capitalizing on emerging opportunities.
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