J.P. Morgan is out with their key 2023 fixed-income themes:
- sees the 10 year falling to 3.4% (is currently at 3.748%).
- Looks for the curve to steepen but looks for more limited yield declined relative to prior cycles
- looks for long-term fixed income issuance to decline but to remain above pre-pandemic averages
- projects a muted demand from bank and foreign investors and think retail and pension funds will be better buyers
- expects yields to fall in the long and to steepen, following Fed on hold cyclicals
- expects better anchor inflation expectations
- clarity over the path for monetary policy should support liquidity benefiting auction cyclical trading strategies
- expects real yields to decline
- with the Fed points to slow, carry and slide should reemerge as an attractive theme on the yield curve next year
- expects money market rates to continue to drift higher and then pause in step with Fed funds
I love the year-end projections, but imagine that at the end of last year no one anticipated rates moving up to 4+ percent. So keep that in mind.