JPMorgan Chase & Co. analysts suggest that investors capitalize on the recent surge in five-year Treasuries, spurred by apprehensions in the regional banking sector and indicators hinting at a potentially lackluster payrolls report on Friday.
The bank had earlier recommended purchasing five-year Treasuries following a spike in yields to a one-month peak in January. However, with JPMorgan now projecting an optimistic outcome for January’s payrolls data, analysts, including Jay Barry, the firm’s co-head of US rates strategy, advise investors to divest from these bonds, as outlined in a report released on Thursday.
“In conjunction with what we perceive as an exaggerated reaction to the regional banking developments and the uncertainties surrounding tomorrow’s employment report, these factors present an upside potential for yields,” they stated.
Despite the Federal Reserve maintaining interest rates on Wednesday and dismissing expectations of a March cut, a downturn in US financial stocks heightened traders’ convictions that the central bank may soon shift towards aggressive easing measures. Consequently, Treasury yields retreated to levels observed at the beginning of the year.
JPMorgan maintains a positive long-term outlook for medium-term Treasuries, anticipating a resurgence in yields in the coming weeks. This anticipated uptick in yields is expected to offer a more favorable opportunity for investors to re-enter long positions.
