US Rates - Cash continues to roll in
The desk believes the influx of cash highlighted in the recent J.P. Morgan podcast indicates a robust demand for short-duration instruments that could support USD stability. Per the full note, cash continues to flow into various funding channels, which is critical ahead of potential shifts in monetary policy. This trend suggests market participants see a low-risk environment in the near term, reflected in low volatility across FX pairs. Current funding conditions may influence investor sentiment as we approach the next rate decision, reinforcing the USD's potential resilience against G10 currencies.
What the desk is arguing
The latest commentary from J.P. Morgan emphasizes the steady influx of cash into funding streams, signaling a healthy demand for liquidity that could favor USD stability in short-duration strategies. According to the analysts, this development is crucial as market participants navigate the evolving monetary landscape, potentially siding with a dovish Federal Reserve stance in upcoming decisions.
The discussion highlights not just the current cash flow, but also a deeper trend wherein investors are actively positioning themselves for a low-volatility environment. The strategies discussed by Ipek Ozil and Pankaj Vohra reaffirm the underlying demand for U.S. assets, suggesting this could particularly benefit short-duration FX plays.
Where it sits in our coverage
At present, our consensus target for USD is set at 1.075 with a projected range between 1.04 and 1.12 against the EUR. Specific firms with contrasting views include: - jpmorgan (target: 1.10, tenor: Mar26) - bofa (target: 1.04, tenor: Mar26)
This desk's call appears to align closely with jpmorgan, anticipating that the robust cash positions will bolster the USD against unforeseen market pressures, thereby positioning USD closer to the higher end of the consensus range.
How other firms see it
Firms aligned with our view include jpmorgan and db, both forecasting a stronger USD position. Conversely, bofa, with a more cautious stance, projects a weaker outlook for the USD in the face of potential international pressures.
As we evaluate this stance, necessary attention should be paid to economic indicators such as U.S. inflation rates and Eurozone GDP growth, which could directly impact USD/EUR dynamics moving forward.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Increased cash flow highlights strong market demand for U.S. liquidity.
- 02Expect USD stability bolstered by short-duration strategies.
- 03Firm consensus shows divided views on USD's future trajectory.
- 04Potential market volatility ahead of the Fed's next rate decision.
Market implications
Watch the performance of the USD against the EUR, particularly around levels near 1.075, which could validate USD bullishness if sustained. Additionally, keep an eye on the broader market sentiment as liquidity events influence FX dynamics.
Risks to this view
A sudden shift in central bank policy, especially from the Fed, could unravel the current bullish sentiment around the USD. Any signs of unexpected economic weakness or geopolitical turmoil could also lead to a rapid reversal of recent cash flow trends.
Welcome to At Any Rate, G.P. Morgan's global research podcast, where we take a look at the story behind some of the biggest trends and themes in fixed income, currency and commodity markets today. I'm Ipek Ozil, head of U.S.
Interest Rate Relative Strategy, and I'm joined here today by P.J. Vohra, a senior strategist on the short-term relations strategy team. We're recording this on July 10th, 2026, and our comments today are based on our published research available on G.P.
Morgan markets. So this week, we saw the ceasefire between the U.S. and Iran to be declared to be over, which brought geopolitical uncertainty back into the macro picture, as the price of Brent crude oil spiked briefly over $80 a barrel. Well, on Wednesday, we had the FOMC minutes, and then yesterday, Federal Reserve announced names of those who will be on the five task forces that the Fed chair, Kevin Rush, announced in the FOMC meeting.
So it's been an eventful week, and all in all, yields are higher and higher over the past two weeks. So but with P.J. here, instead, today, we're going to focus on the funding markets, which have been trading relatively soft, and then we're going to do a quick deep dive into inflows into low duration bond funds. However, before we get started, I also just want to take a quick second here to say that it is indeed the most wonderful time of the year for us rate strategists, as it is Exxon Global Fixed Income Survey season.
And if you're eligible to vote, and if you have benefited from our research and our podcasts, please consider voting for J.P. Morgan in the survey. Our race research team is listed in various categories that we cover, as well as broadly U.S. rates and fixed income strategy.
Thank you. And with that out of the way, P.J., let's talk repo. So repo has been printing quite soft lately, but how soft are we talking about and what's been driving it?
Sure. Thanks, Ipek. And thanks for having me on this podcast.
So you're right. Repo has been trading pretty soft so far this month. As of July 9, SOFR benchmark was down to 353 percent, which is about 15 basis point decline since the end of June.
Tri-party, or TGCR, has also moved lower, which is down about 13 basis points over the last week and a half as well. Now consistent with that, we have also been seeing the softness kind of flow into the unsecured market. And when I talk about unsecured market, I'm specifically referring to the effect of that funds rate that has declined by one basis point and back to 362 percent.
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