JPMorgan Raises Long-End U.S. Treasury Yield Forecasts as Wall Street Views Diverge
Miles Bennett
JPMorgan lifted its year-end 10-year Treasury yield forecast to 4.85% and its 30-year to 5.40%, pulling its first-hike call forward to December; Wall Street broadly agrees on steepening but is split on duration and hedging — August CPI becomes the decisive test.
What exactly is JPMorgan saying?
The core move: 10-year year-end forecast raised from 4.70% to 4.85%, 30-year from 5.20% to 5.40%, with the first Fed hike call pulled forward from H2 next year to December this year.
Two reasons behind the upgrade: a renewed bullish tilt on inflation breakevens (the market's gauge of future inflation expectations), and the view that term premium — the extra return investors demand for holding longer-dated bonds — has room to rise further.
This means → JPMorgan thinks long-end rates have not peaked yet, and recommends positioning for wider 2y-10y spreads — a bet that the yield curve keeps steepening.
How far has the long-bond selloff gone?
30-year yields hit 5.28% last Friday, the highest since 2007; they pulled back modestly to around 5.22% on Monday.
The 10-year fell roughly 5 basis points to about 4.68% on Monday, dragged lower by a sharp drop in oil prices — but most desks see this as noise, not a trend reversal. The long-end uptrend remains intact.
In plain terms = short-end rates are falling while long-end rates are rising, and the curve is getting steeper — that shape itself is the market saying "we're not confident the Fed can rein in inflation."
Where do the other banks stand — same direction, different conviction?
Barclays: long-end yields still have room to climb; the 2y-30y spread sits well below its 150-basis-point long-run average. But the bank stresses that "unless Chair Waller commits to an outright hiking cycle — contradicting his stated refusal to offer forward guidance — long-term yields must find their own way."
Goldman Sachs: prefers cross-market trades to express higher curve risk premium, but is cautious on the persistence of the bear-steepening move, calling it "more of a tactical risk than a structural one."
This means → the big banks agree on the steepening direction; the split is whether this is a durable trend or a tradeable short-term dislocation.
Why did Morgan Stanley and BofA pick opposite hedging paths?
Morgan Stanley keeps its 7y-30y steepener but layers on short-end rate-option hedges — protection against the next two payroll reports and CPI prints reigniting September hike bets. The report flags: if August CPI (due September 11) comes in hot, the market could price in more than one 25-bp hike.
BofA's Cabana goes the other way, recommending a 2y-10y flattener — a bet that the Fed will restore its inflation credibility. He labeled last week's long-bond selloff "a textbook inflation-credibility shock" and said: "It's great that you're determined to hit 2%, but unless you tell us how, we won't believe you — and you can't fool the bond market."
In plain terms = Morgan Stanley is saying "the steepener still works, but buy insurance"; BofA is saying "the market overreacted — the Fed will find a way to claw back credibility."
What is Scotiabank's contrarian bet?
Scotiabank argues the market underprices the chance of a rate move at the October meeting, recommending paying October while receiving September and December — essentially betting the hike lands in October, not the months the market favors.
The bank also leans into the belly of a 2y-5y-10y butterfly, expecting gains from potentially softer payrolls, unchanged Treasury refunding guidance, and further Fed communication.
This reflects a deeper point: even within the steepening consensus, banks disagree sharply on the timing of the first hike — and August CPI data will be the key test of who has it right.
Content is for reference only, not financial advice.