J.P.Morgan Global Markets Strategy 12 August 2024 EM Equity ETF Flows Daily net subscriptions/redemptions of major EM Equity ETFs – 9 August 2024 Total EM: Net redemptions of US$12mn. o EM Broad: Net redemptions of US$1mn. o EM Asia: Net redemptions of US$11mn. o Brazil: Net redemptions of US$38mn. o Mexico: Strong subscriptions of US$28mn. o China: Net redemptions of US$10mn. o Korea: Net subscriptions of US$4mn. o Equity Macro Research Rajiv Batra Ac (65) 6882-8151 rajiv.j.batra@jpmorgan.com Khoi Vu, CFA ...

J.P.Morgan Global Markets Strategy 11 August 2024 This material is neither intended to be distributed to Mainland China investors nor to provide securities investment consultancy services within the territory of Mainland China. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. China Equity Data Tracker A macro and results-heavy week ahead | --- | --- | |---------------------------------------------------------------------------------- ...

Investment Rating - The report does not explicitly state an investment rating for the industry or specific securities [1]. Core Insights - The analysis focuses on the spreads to Treasury Spline and Swap Analysis, indicating a detailed examination of the relative value of various securities [2][34]. - The report highlights the importance of monitoring the average spreads and their fluctuations over a 61-day data history, which is crucial for understanding market trends [3][34]. - The report emphasizes the significance of coupon rates and their impact on investment returns, particularly in the context of different maturities [12][62]. Summary by Sections Treasury Spline and Swap Analysis - The report provides a comprehensive overview of the Treasury Spline and Swap Spread, detailing various maturities and their corresponding spreads [31][34]. - It includes specific data points such as the average, maximum, and minimum spreads, which are essential for evaluating investment opportunities [36][50]. Spread to Treasury Spline - The analysis includes a breakdown of spreads to Treasury Spline, indicating the relative performance of different securities against benchmark rates [48][60]. - The report notes that the bars representing spreads are shaded to indicate significant deviations from the average, which can signal potential investment opportunities [22][41]. Interpolated Swap Spread - The report discusses the interpolated swap spread, providing insights into how these spreads relate to overall market conditions and investor sentiment [23][55]. - It highlights the importance of understanding the dynamics of swap spreads in relation to Treasury yields, which can influence investment decisions [10][37].

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - Reserve balances in the US have fallen to their lowest levels since 2023, now constituting around 11% of GDP, indicating a shift towards "ample" liquidity conditions [2] - Repo rates have increased since May, with SOFR settling in a new range of 5.33% - 5.35%, and daily volumes are at record highs, reflecting high demand for repo leverage [2] - The August quarterly refunding announcement introduced a recommendation for T-bills to constitute an average of around 20% of outstanding debt, which may lead to higher bill supply in the coming quarters [3] - The Treasury has ramped up its debt buyback operations, which could positively impact funding conditions by reducing dealer inventories [3] - The report anticipates that the Fed will introduce plans to wind down quantitative tightening (QT) in early 2025, concluding around mid-year [6] - Money market funds (MMFs) are expected to see moderate asset growth as the yield gap between bank deposits and money market yields remains wide [7] - SOFR is expected to rise over the coming months, potentially reaching or exceeding the IORB level in Q4 [7] - A technical adjustment to lower the ON RRP rate by 5 basis points could occur later this year if SOFR rises sustainably [8] Summary by Sections Recent Developments - Reserve balances have declined significantly, and ON RRP balances have resumed their decline [2] - Repo rates have increased, with high demand for repo leverage due to rising Treasury inventories [2] Policy and Market Outlook - QT is expected to stop when reserve balances reach around $3 trillion, with plans to wind down QT anticipated in early 2025 [6] - ON RRP usage is expected to decrease, with average daily use potentially falling to around $200 billion by mid-September [6] Money Market Funds - Moderate asset growth is expected for MMFs as the yield gap remains historically wide [7] - MMFs have been conservative on WAM extensions, leading to increased investment in repo [40] Treasury and Debt Operations - The TBAC's updated recommendation for T-bills may result in higher bill supply over the next few quarters [47] - The Treasury anticipates a reduction in the TGA from $850 billion to $700 billion, which may alleviate year-end funding pressures [3]

Investment Rating - The report does not explicitly provide an investment rating for the industry or specific securities [1]. Core Insights - The upcoming auction on August 8, 2024, will offer $25 billion of 30-year bonds, unchanged from the previous auction [4]. - Thirty-year yields have decreased by 16 basis points from the last auction, currently trading around 4.25% [4]. - Indirect bidder participation has decreased to 60.8%, the lowest since November, while direct bidder participation has increased to 23.4%, the highest since December 2014 [4]. - Investment funds accounted for 74.5% of the total allocation, marking an increase from June's 73.4% and the highest since January [4]. - The auction had a tail of 2.3 basis points, while the previous auction had a stop-through of 1.3 basis points [4]. Summary by Sections Auction Statistics - The average size of the 30-year bond auction is $22.3 billion, with the July 2024 auction size at $22.0 billion [2]. - The cover ratio for the July auction was 2.30, slightly lower than the 1-year average of 2.39 [2]. - Direct and indirect bidders accounted for 84.1% of the total bids in July, with direct bidders at 23.4% and indirect bidders at 60.8% [2]. Auction Allotments - In the July auction, investment funds took 74.5% of the total allocation, while foreign and international bidders accounted for 7.4% [3]. - The total less SOMA for the July auction was $16.4 billion, with dealers and brokers taking $3.9 billion [3]. Bidding Aggressiveness - The auction bidding aggressiveness index indicates a more aggressive bidding environment compared to previous auctions [5][6]. Federal Reserve SOMA Add-ons - The Federal Reserve is expected to rollover $4.75 billion into its SOMA portfolio during the upcoming auction [4].

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The report indicates that reserve balances have fallen to their lowest levels since 2023, constituting around 11% of GDP, which is the lowest since the start of quantitative tightening (QT) [1] - Repo rates have increased since May, with the Secured Overnight Financing Rate (SOFR) settling in a new range of 5.33% - 5.35%, and daily volumes are at record highs [1] - The Federal Reserve is expected to introduce plans for winding down QT in early 2025, concluding around mid-year, contingent on market functioning [5] - Money market funds (MMFs) are expected to see moderate asset growth as the gap between bank deposits and money market yields remains wide [6] - The Treasury has ramped up its debt buyback operations, which could positively impact funding conditions by reducing dealer inventories [2] Summary by Sections Recent Developments - Reserve balances have recently fallen to their lowest levels since 2023, now around 11% of GDP [1] - Repo rates have increased, with SOFR in the range of 5.33% - 5.35% and record high daily volumes [1] - Fed funds rate remains stable despite pressures in repo markets, likely due to large liquidity held by GSEs [1] Policy and Market Outlook - QT is expected to stop when reserve balances reach around $3 trillion, with plans to wind down QT anticipated in early 2025 [5] - ON RRP usage is expected to decline, potentially falling to around $200 billion by mid-September [5] - SOFR is expected to rise, potentially above the Interest on Reserve Balances (IORB) level in Q4 [6] Money Market Funds - Moderate asset growth is expected for MMFs as the yield gap remains wide [6] - MMFs have been conservative on weighted average maturity (WAM) extensions, leading to more investment in repo [39] Treasury and Debt Operations - The TBAC recommends T-bills to constitute an average of around 20% of outstanding debt, which may increase bill supply in the coming quarters [2][46] - The Treasury anticipates a reduction in the TGA from $850 billion to $700 billion by December 31, which may alleviate year-end funding pressures [2]

Investment Rating - The report does not explicitly provide an investment rating for the US Fixed Income market Core Insights - The bullish bias for the US front-end rates is no longer valid due to a terminal rate priced slightly below reasonable neutral estimates and improved lending standards indicating a lower likelihood of recession [3][7][10] - Term premia are structurally low, suggesting a stronger case for higher long-end rates from both data and valuation perspectives [3][10] - Recent data indicates a weaker labor market, with the private sector quit rate at 2.3%, historically consistent with an unemployment rate above 4.5% [3][4] - The Fed's Senior Loan Officer survey shows improvement, weakening the bullish bias for front-end rates [6][7] - The market is pricing a terminal rate slightly below 3.25%, requiring evidence of a recession for a significant rally in front-end rates [7][10] Summary by Sections Bond Market Strategy - The rationale for maintaining a bullish front-end bias has diminished due to recent repricing and data [3] - The case for being long the front-end is more nuanced compared to previous months, with improved lending standards and a stable labor market [6][10] Macro Portfolio Update - The report outlines various trades and their rationales, indicating a shift in strategy towards maintaining positions rather than entering new ones [11] Fed Liquidity and Money Market Monitor - Repo rates have shown increased firmness, with elevated demand for leverage contributing to higher rates [13] - The Fed's QT is expected to continue until reserve balances fall to around $3 trillion, with potential adjustments to mitigate upward pressure on overnight rates [14][18] Economics - The report anticipates stable inflation data, with expectations for CPI and PPI to show similar monthly gains [35][37] - The upcoming economic calendar includes significant data points that could influence Fed rate cut discussions [38][40] Fixed Income Charts of the Week - The report includes various charts that illustrate trends in the fixed income market, including the relationship between credit spreads and potential inter-meeting cuts [21][24]

Investment Rating - The report provides a general investment rating for Restaurant Brands International Inc. bonds as "Ba2" for certain term loans and notes, indicating a speculative grade with potential for moderate credit risk [8]. Core Insights - Restaurant Brands International reported Adjusted EBITDA of $720 million for Q2'24, reflecting an increase of 8.3% compared to $665 million in Q2'23, with revenues reaching $2.08 billion, up 17.2% from $1.78 billion in Q2'23 [2][3]. - The performance of individual segments showed growth, with Tim Hortons achieving Adjusted EBITDA of $307 million (+7.7%) and revenues of $1.03 billion (+2.3%), while Popeyes reported Adjusted EBITDA of $70 million (+7.7%) on revenues of $194 million (+12.1%) [5][6]. - The International segment also performed well, with Adjusted EBITDA of $176 million (+2.6%) and revenues of $232 million (+5.9%), contributing to system-wide sales of $4.52 billion, an increase of 9.2% [6]. Financial Summary - The financial snapshot for Q2'24 indicates significant revenue growth across various segments, with Burger King revenues at $364 million (+11.3%), Tim Hortons at $1.03 billion (+2.3%), and Popeyes at $194 million (+12.1%) [3][5]. - The total revenue for Restaurant Brands International was $2.08 billion, marking a 17.2% increase from the previous year [3]. - The company ended Q2'24 with total debt estimated at $14.14 billion, reflecting a pro-forma leverage of 5.1x, indicating a slight increase from 4.9x in Q1'24 [6].

Investment Rating - The report does not explicitly state an investment rating for the industry [1]. Core Insights - The report highlights a focus on upcoming economic data releases, including US CPI and retail sales, which are expected to show a rise of +0.20% MoM for both headline and core CPI [2][4]. - In the UK, inflation is projected to increase to 2.3% for headline CPI and 3.5% for core CPI, indicating a steady rise after two months at the target [3]. - Japan's Q2 GDP is anticipated to show a real GDP growth of 2.7% QoQ annualized, while the PPI is expected to rise by 2.9% YoY [4]. - In China, industrial production is expected to slow slightly to 5.2% YoY, while retail sales are projected to improve to 2.5% YoY [4]. Economic Data Releases - The report outlines a detailed calendar of significant economic data releases for the week of August 12, including US July PPI, CPI, retail sales, and industrial production [5]. - Key earnings reports from major corporations such as Walmart, Cisco, and Alibaba are highlighted, indicating a focus on consumer health and corporate performance [4][5]. - The report notes that the University of Michigan consumer survey is expected to show an increase in the sentiment index to 69.1 from 66.4 in July [2]. Central Bank Focus - The report mentions upcoming rate decisions from central banks in Norway and New Zealand, as well as the MLF rate fixing from China [3][4]. - The Federal Reserve's Jackson Hole symposium is noted as a significant upcoming event for monetary policy discussions [2].

Investment Rating - The report rates ModivCare Inc.'s bonds as Buy, indicating an expectation for these bonds to outperform other issues in the sector over the next three to six months [1][27]. Core Insights - ModivCare Inc. (MODV) reported Q224 EBITDA of $45 million, slightly above Bloomberg consensus of $42 million and a significant improvement from $32 million in Q124, leading to a last twelve months (LTM) EBITDA of $179 million [4][18]. - The company won new NEMT contracts in Q224, generating $33 million in annual revenue, which is expected to positively impact the second half of 2024 [1][10]. - ModivCare's leverage target is set at 3x, with current net leverage reported at 5.2x, indicating a focus on improving core operations and considering strategic options [6][18]. - The company has lowered its 2024 EBITDA guidance to a range of $185-195 million, primarily due to weaker-than-expected results from its PCS segment [7][18]. - ModivCare's liquidity position is reported at $99 million, with cash of $11 million and revolver availability of $89 million [16]. Financial Performance - The LTM net leverage as of June 30, 2024, is reported at 5.2x, which includes $45 million of cost savings, while a calculation without these add-backs shows a net leverage of 6.5x [5][18]. - The company expects to generate positive free cash flow (FCF) in 2024, with a conversion rate of approximately 30% of EBITDA [7][18]. - ModivCare's revenue for FY2024 is projected at $2,818 million, with EBITDA expected to be $180 million [19]. Contractual Developments - In Q224, ModivCare secured new contracts that contribute to a total of approximately $211 million in annual revenue from contracts won in 2023 and 2024 [10]. - The company anticipates monetizing its Matrix asset in late 2024 or early 2025, which could significantly improve its leverage profile [13][18]. Market Position - ModivCare's PCS EBITDA improved to $15 million in Q224, up from $11 million in Q124, but remains below the annual run rate potential of $75 million [11]. - The company expects to exit 2024 with PCS margins approaching 10%, with NEMT margins projected to increase by roughly 100 basis points [12].