JPMorgan Chase: Recommends tactical short of 2-year US Treasuries, saying it's unlikely Warsh will push for aggressive rate cuts after taking office.

According to Mars Finance, on February 13th, as the selection of the Federal Reserve Chairman neared completion, JPMorgan Chase suggested "selling 2-year US Treasury bonds" as a tactical trade. The bank anticipates that although Kevin Warsh will likely take over the Fed, given the solid economic fundamentals, his room for significant interest rate cuts is limited. JPMorgan Chase predicts that the core CPI in January may rise to 0.39% month-on-month, higher than the market consensus of 0.31%, reflecting continued price pressures at the beginning of the year. Strategists point out that strong economic growth and sticky inflation will limit the downside potential of front-end interest rates, making it "difficult for front-end interest rates to fall significantly from current levels." The market currently expects the Fed to cut rates by 25 basis points as early as July, and another cut before the end of the year. The 2-year Treasury yield rose slightly to 3.47% before the CPI data release. However, there are differing opinions. Greenlight Capital founder Einhorn is betting that interest rate cuts under Warsh's leadership will exceed market expectations and has already bought SOFR futures to position for a more accommodative policy path.