Take profits on five-year Treasuries now says JPMorgan

Three weeks after recommending investors sell five-year Treasuries, strategists at JPMorgan Chase & Co. say it’s time to pocket profits from the trade. 

Yields on US five-year government debt have climbed more than 20 basis points from a low of about 4.20% just under three weeks ago. The surge, which is also reflected across other parts of the curve, underscores heightened selling pressure from month-end index rebalancing and amplified jitters of US higher interest rates after last week’s presidential debate. 

“With yields retracing back toward the middle of their three-month ranges, valuations are looking cheaper,” strategists including Jay Barry wrote in a note Monday. “We recommend taking profits on five-year shorts ahead of elevated event risk during this abbreviated week,” noting US employment and payroll data arrive the day after the Independence Day holiday.

Treasuries have whipsawed this year as traders swung between buying bonds amid signs of cooling US prices and fears of higher-for-longer rates. The possibility of another Donald Trump presidency is also causing uncertainty among investors. 

“Our forecasts are very close to consensus, and look for further gradual moderation across both reports, which would be consistent with neutral risks to rates,” the note added. 

Yields on five year Treasuries held at around 4.41% in early Asia Tuesday after advancing 13 basis points in the past two sessions. Those on benchmark 10-year Treasuries steadied at around 4.45%.