JPMorgan: Recommends tactically shorting the 2-year U.S. Treasury, saying it will be difficult to push for aggressive rate cuts after Wosh takes office

BlockBeats News, February 13 — As the nomination of the Federal Reserve Chair approaches its conclusion, JPMorgan recommends selling 2-year U.S. Treasury bonds as a tactical trade. The bank expects that although Kevin Warsh, if appointed, will take over the Fed, the room for significant rate cuts remains limited given the solid economic fundamentals.

JPMorgan forecasts that the January core CPI may rise to 0.39% month-over-month, above the market consensus of 0.31%, reflecting ongoing price adjustments and persistent inflation pressures at the start of the year. Strategists note that strong economic growth and inflation stickiness will limit the downward space for front-end rates, stating, “Front-end rates are unlikely to decline significantly from current levels.”

The current market expects the Fed to cut rates by 25 basis points as early as July, with another cut before the end of the year. The 2-year Treasury yield slightly increased to 3.47% ahead of the CPI data release.

However, there are dissenting voices. Einhorn of Greenlight Capital bets that the rate cuts during Warsh’s tenure will exceed market expectations and has already bought SOFR futures to position for a more accommodative policy path.