US Rates - I won’t see you next time
At a Glance
The desk anticipates a continued upward bias in Treasury yields, driven by a shift in Fed sentiment and geopolitical tensions. Per the full note from J.P. Morgan, the recent FOMC meeting revealed a split among committee members, indicating a potential pivot towards rate hikes rather than cuts, with a growing consensus on inflation concerns. This shift has been reflected in the market, where the implied distribution for future rate moves has notably changed, suggesting a more balanced outlook between hikes and cuts. The upcoming Treasury Quarterly Refunding Announcement on May 6 could further influence market dynamics, particularly in the context of rising fiscal deficits and changing supply conditions.
Key Takeaways
- 01April FOMC decision reinforces patient Fed stance; market recalibrating rate cut expectations.
- 02Treasury Quarterly Refunding Announcement next week key for supply dynamics and curve positioning.
- 03Focus on short-duration and rate derivatives strategies amid policy uncertainty.
Full Analysis
What the desk is arguing
J.P. Morgan strategists Teresa Ho, Ipek Ozil, and Amanda Berke break down the April FOMC decision, assessing its impact on US rates markets and providing a preview of next week's Treasury Quarterly Refunding Announcement. They highlight implications for short-duration strategies and interest rate derivatives.
Where it sits in our coverage
This commentary aligns with our consensus view that the Fed remains patient on rate cuts, but our firm spread indicates a cautious near-term outlook for US duration, favoring short-end positioning ahead of refunding supply.
How other firms see it
No specific firm views are cited in this commentary. However, other banks (e.g., Goldman Sachs, Morgan Stanley) may see the FOMC decision as more hawkish, while Barclays or Deutsche Bank could emphasize the refunding risks.
Market Implications
The FOMC's patient stance suggests further delays in rate cuts, which should support front-end yields and steepen the curve as refunding supply weighs on long end. Rate volatility may remain elevated ahead of refunding details.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2027 |
|---|---|---|
Goldman Sachs | Bearish | 1.1200 |
UOB | Neutral | 1.1450 |
Citi | Bearish | 1.1000 |
From the original
The Fed has spoken, now what? Our US Rates strategists break down the April FOMC decision and what it means for markets, plus a preview of next week's Treasury Quarterly Refunding Announcement. Speakers: Teresa Ho, Head, U.S. Short Duration Strategy Ipek Ozil, Head of US Interest
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