Long-End of Yield Curve Has 'Sneaky Bid,' Says JPM's Misra

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00:00You know, Jenny, yesterday was talking about 375 in the 10-year, but that was predicated on oil going lower.

00:04And it doesn't seem like, at least from today's headlines, that that's going to happen.

00:07But you still see a 10-year down at that range or even lower by the end of the year?

00:12So in a sub-trend growth environment, XAI, which is a 1% to 2% type GDP,

00:18I think our 10-year forecast really for the last year and a half has been 375 to 4.25.

00:24So we can absolutely drift closer to 375 as people realize, maybe I need some bonds in the portfolio.

00:31Bonds are giving you income as well as diversification.

00:34You just have to look at days like last Friday or the Friday before that.

00:38You have, you know, we still have a lot of uncertainty around U.S., China,

00:42around these credit cockroaches, as we're calling it, which, you know, can happen.

00:47I don't think it's a systemic issue.

00:49But if you have a lot of risk assets in the portfolio, I think owning bonds is what's creating that pressure for the 10-year

00:56that was getting close to 4.5 is now below that.

00:59What's the incentive for going beyond that?

01:00So we have a 30-year yield today at 457.39.

01:03And, you know, if your scenario comes true, that could come down even further.

01:08It could.

01:09I think some of it is a reduction in fears around either the deficit.

01:13Remember just a few months ago, the concern was the deficit's out of control.

01:17There's a Sell America trade where we have now tariff revenues that are helping the deficit.

01:22They're paying for the one big beautiful bill overall if tariffs stay here.

01:26So I think some tariff concerns have come down.

01:28Fed independence, big concern with Lisa Cook firing, maybe Chair Powell firing.

01:34I think we've realized that's not going to happen.

01:36The Fed and the different Fed chairs that are being talked about, all credible candidates.

01:41I think the market's a lot less concerned.

01:43That's why the long end, I would say, has had this sneaky bid.

01:46As some of all those concerns, the term premium increase, that's been coming down.

01:50So, yeah, can we come down a little bit more?

01:53I think if the economy stays okay, you're probably looking at 10, 20 basis points.

01:58If we start to see further slowdown in the labor market and the Fed's cutting to below 3%,

02:04I think then that long end has a lot of room to decline.

02:06We still prefer the 5 to 10 year part of the curve, not too further out, because that is sort of a lot more duration risk.

02:13But I do think some of the concerns around the steepener and let the long end can go to the moon.

02:19Now, I think fortunately, a lot of that has been taken off the table.

02:23So, let's go.