JPMorgan Bets Big on Long-Term Debt Revival

This article first appeared on GuruFocus.

JPMorgan (NYSE:JPM) Asset Management sees the long end of the bond market setting up for a quiet comeback. Seamus Mac Gorain, who heads rates at the $3.4 trillion fund, said the tide is changing after years of oversupply in government debt. With debt offices cutting back on longer maturities and central banks dialing down their balance-sheet roll-offs, the firm believes the recent decline in 30-year yields could run further. JPMorgan’s positioning favors longer-dated British and Australian bonds, while also expecting Japan’s yield curve to flatten as the long end outperforms. Mac Gorain noted that officials are proactively realigning supply, aware that investor appetite for long-term paper has thinned.

Since early September, yields on 30-year Treasuries have dropped more than 30 basis points, with similar declines across major marketsU.K. gilts down 55 basis points and Japanese long yields off 30 basis points from their October peak. Behind the shift is a wave of coordinated policy moves: the U.K. and Japan have tilted issuance toward shorter maturities, the U.S. Treasury has restarted buybacks, and the Fed will halt its $5 billion-a-month Treasury runoff starting December 1. That slower pace of quantitative tightening, mirrored by the Bank of England and Bank of Canada, could be helping stabilize long-end sentiment. It helps that central banks are shifting away from QT now, Mac Gorain said.

In the U.S., easing bank capital rules and the Trump administration’s push to advance stablecoins may further support Treasuries, with Treasury Secretary Scott Bessent suggesting the measures could lower yields by several dozen basis points. Yet, the broader backdrop still looks demandinggovernments are under pressure to fund defense and green projects, while pension funds are rotating into riskier assets to chase returns. Mac Gorain sees inflation as the main swing factor that could disrupt the trend but believes policymakers will intervene if long yields spike again. They’re not going to stand idly by while you have very high long-term yields, he said.