JPM US Dollar Treasury Liquidity D (acc.) - J.P. Morgan Asset Management



The major event of the fourth quarter was the surprise Republican sweep of the White House and both chambers of Congress. With the exception of a very brief risk-off reaction by global markets, bond yields and equity prices have moved higher since the US election on expectations of deregulation, corporate and individual tax cuts, and higher infrastructure spending. US Treasuries suffered and the curve steepened over the quarter - two-year yields rose 43 basis points (bps) to 1.19%, five-year yields climbed 78bps to 1.93% and 10-year yields soared 85bps to 2.44%.

The fourth quarter was highlighted by money market reform and the Federal Reserve (Fed) raising rates for the second time in almost a decade. Money market reform saw a trillion dollar of assets migrate from prime money market funds to government funds. Higher Treasury and agency issuance, as well as larger holdings of securities by dealers, allowed repo and short government rates to remain stable. The Fed raised rates by 0.25% to a new range of 0.50% to 0.75%, raising the theoretical floor on repo to 0.50%. The fund continues to carry ample liquidity and was active in both fixed and floating rate securities opportunistically across the curve.


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7 Country exposure will include the counterparty domicile for repurchase agreements.