Lower Treasury yields can’t be sustained unless they’re supported by the fundamentals: Kelsey Berro

Summary

JPMorgan Asset Management's Kelsey Berro discusses the recent rise in long-end Treasury yields, attributing the move to increased term premium rather than inflation fears. She notes that the higher yields are attracting incremental demand from investors due to strong US economic fundamentals, while also highlighting ongoing geopolitical risks that could impact oil prices and inflation.

• The Treasury's announcement to increase debt buybacks was a surprise aimed at providing near-term stability.
• Long-end yield increases are driven by term premium from geopolitical and Fed uncertainty.
• Inflation expectations and terminal rate pricing remain well-anchored despite the yield curve repricing.
• Higher Treasury yields are attracting positive flows into the fixed income market.
• Strong US growth and solid corporate earnings support the attractiveness of current yield levels.
• Geopolitical tensions continue to pose upside risks to oil prices and inflation.