We're in 'a pretty sweet spot' for yields right now, says JPMorgan's Kelsey Berro

Summary

Kelsey Berro of JPMorgan Asset Management analyzes the Fed's decision to hold rates steady, noting that the bond market reaction—front-end yields up, long-end yields down—reflects confidence in Fed credibility on inflation. She highlights that investment grade credit yields in the 5-6% range are in a sweet spot, offering compelling carry income regardless of future rate moves.

• Fed held rates steady with a clear focus on price stability over growth mandates.
• The yield curve flattened as front-end yields rose while 30-year yields fell.
• Declining long-end yields signal anchored inflation expectations and Fed credibility.
• Investment grade credit yields around 5-6% are viewed as a sweet spot for carry.
• Strong demand and heavy debt issuance for data centers and innovation support the range.
• Job market moderation and a potential inflation peak in May reduce the odds of aggressive hikes.
• Fed Chair Warsh pushed back on the idea of a cruel trade-off between inflation and employment.
• Berro recommends investing in fixed income for income rather than betting on rate direction.