Global Rates: Global DM Swap Spread Outlook
J.P. Morgan discusses the main drivers of DM swap spreads, focusing on central bank policy divergence and hedging demand. The outlook is for moderate widening as rate cut expectations stabilize.
What the desk is arguing
J.P. Morgan analysts highlight that DM swap spreads are being driven by diverging monetary policy paths across major economies and increased hedging activity from asset managers. They expect spreads to widen modestly as central banks synchronize on rate cuts, but with idiosyncratic risks in each market.
Where it sits in our coverage
Our internal consensus aligns with a neutral-to-wider view on DM swap spreads, with a firm spread of 2-5 bps widening over Q2. We see the US as the key driver given its lead in the rate cycle.
How other firms see it
- **goldman-sachs**: Expects slight narrowing on the back of better liquidity. - **morgan-stanley**: Flags upside risks from fiscal supply. - **deutsche-bank**: Warns of fragmentation risk in Eurozone spreads.
How firms align with this view
Key takeaways
- 01DM swap spreads likely to widen moderately as central bank rate cuts converge.
- 02Hedging activity from asset managers remains a key demand driver.
- 03Divergent fiscal and monetary policies create idiosyncratic risks across jurisdictions.
Market implications
A moderate widening in swap spreads implies higher hedging costs for corporates and banks, potentially dampening fixed-income issuance. It also signals improved pricing of credit risk, which could benefit short-volatility strategies.
Risks to this view
Faster-than-expected central bank easing could compress spreads, while a resurgence in inflation or fiscal slippage could trigger sharp widening. Liquidity dislocations in specific tenors also pose tail risk.
In this podcast Khagendra Gupta, Ipek Ozil, Francis Diamond, Takafumi Yamawaki, and Ben Jarman discuss the main drivers of DM swap spreads. This podcast was recorded on 20 March 2026. This communication is provided for information purposes only.
Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-5230870-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2026 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P.
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