Summary of J.P. Morgan Global Fixed Income Markets 2026 Outlook Industry Overview - **Industry**: Global Fixed Income Markets - **Company**: J.P. Morgan Securities plc Key Themes and Core Views - **Baseline Macro View**: Growth is expected to run at or above potential across most developed markets (DM), with inflation declining but remaining sticky above target in several jurisdictions [8][18] - **Central Bank Actions**: - Most DM central banks are expected to either maintain current rates or conclude easing cycles in the first half of 2026. - The Federal Reserve (Fed) is anticipated to cut rates by 50 basis points (bp) and the Bank of England (BoE) by 75 bp, while the Bank of Japan (BoJ) is expected to hike by 50 bp by the third quarter of 2026 [8][18] - **Yield Forecasts**: - 10-Year U.S. Treasuries (UST) forecasted at 4.35%, 10-Year Bunds at 2.75%, and 10-Year Gilts at 4.75% by the fourth quarter of 2026 [8][18][21] - **Market Risks**: The U.S. presents the widest risk distribution due to personnel and fiscal dominance issues, adding uncertainty to the Fed's outlook [8][18] Trading Recommendations - **Treasuries Strategy**: - A recommendation for a 50:50 weighted 2s/5s/10s belly-cheapening fly, anticipating cheapening in the 5-Year sector as the Fed goes on hold in the second half of 2026 [8][18] - **Cross-Market Divergences**: - Suggested buying payers on 5-Year SOFR rates funded by selling payers on 5-Year EUR rates and buying calls on June 2026 SONIA vs SOFR [8][18] - **Euro Area Strategy**: - Expectation for 10-Year Bund yields to remain range-bound, with a forecast of 2.65% by mid-2026 and 2.75% by year-end [9][19] - **UK Strategy**: - Anticipation of the BoE easing by 25 bp in December and two more cuts in the first half of 2026, targeting a Bank Rate of 3.25% [10][18] - **Scandinavian Markets**: - Both Riksbank and Norges Bank expected to stay on hold, with a recommendation for Jun26/Dec26 SEK FRA curve flattener as a carry trade [11][18] - **U.S. Market Dynamics**: - Expectation for yields to remain range-bound initially, with a rebound anticipated once the Fed goes on hold in spring 2026 [13][18] Additional Insights - **Inflation and Economic Resilience**: Despite inflation being stickier than expected, DM growth has shown surprising resilience, with recent data indicating disconnects between consumer sentiment and capital expenditure [22][18] - **Market Volatility**: Increased volatility is expected in the second half of 2026, particularly in France as the 2027 presidential election approaches [19][18] - **Interest Rate Forecasts**: - Detailed interest rate forecasts for various countries, including the U.S., UK, Euro area, Japan, and Australia, with specific rates and changes outlined for 2026 [16][21] This summary encapsulates the key points from the J.P. Morgan Global Fixed Income Markets 2026 Outlook, highlighting the anticipated economic conditions, central bank actions, trading strategies, and potential risks in the market.