US Treasury yields at high levels offer long-term value; JPMorgan launches a "low-beta steepener" trade.

Title context: US Treasury yields at high levels offer long-term value; JPMorgan launches a "low-beta steepener" trade. Text: Against the backdrop of the global asset pricing anchor (US Treasury yields) resonating with multiple variables such as geopolitics and weather, JPMorgan's latest global macro outlook and strategy sketches a market picture of "structural divergence and converging opportunities": US Treasury yields have fallen back driven by equity market risk aversion and debt management expectations, European bonds are stabilizing after a sharp selloff, the dollar remains relatively strong supported by "American exceptionalism," and El Nio is quietly rewriting the pricing logic for the European winter and the Shenzhen Agricultural Power Group market. Overall, JPMorgan's stance is "cautious optimism"yields remain at high levels and offer long-term value, but near-term uncertainty is elevated, with opportunities concentrated more in selected structural positions rather than broad directional bets. US Treasuries: The low-beta steepener takes the stage; supply and structural constraints on the long end JPMorgan judges that this round of US Treasury yield declines has been driven both by equity market risk concerns and by rising market expectations of a shift in the Treasury Department's debt management strategy. On the policy front, the Fed is expected to raise rates by another 25 basis points in December; after the rebound, short-end valuations are no longer significantly undervalued, while the 10s/30s curve is clearly too flat, so it has initiated a "long 10s/30s steepener" trade as a low-beta tool to indirectly express long durationif the Treasury does not signal a reduction in long-end issuance at next month's refunding, this position could benefit. Worth noting is the change in investor structure. Overseas official demand has fallen to its lowest since 2021, commercial banks' appetite for buying Treasuries has weakened, and long-end investors are migrating toward more price-sensitive groups, making long-end US Treasury yields prone to staying relatively high. JPMorgan, citing historical experience from the UK and Japan, cautions that the boost to markets from adjusting long-end issuance or buybacks has a very short half-life, mostly producing pulse-like effects, and one should not place excessive hopes on supply-side policy. Europe, the UK and Asia-Pacific: Tactical caution and strategic value amid stabilization Euro area bond markets have stabilized over the past two weeks after a sharp September selloff, with the yield curve flattening by 5-6 basis points overall, underperforming the AI sentiment-driven US Treasury bull flattening. Given the evolution of the Middle East conflict and the still-large uncertainty over the scale of the AI sector pullback, JPMorgan remains tactically cautious on unilateral duration exposure in Europe, but stresses that yields remain high and are attractive to long-term investors, and maintains a strategic overweight in German bunds relative to US Treasuries. Within the euro area, it is cautious on Italian, French and Spanish sovereign spreads and prefers long relative-value structural positions. On the UK, it remains tactically neutral on duration, is long-term positive on the value of yield allocation, and expects the fiscal budget not to significantly raise term premiums. In Japan, it maintains the 2s10s JGB steepener trade but with reduced confidence; the super-long end is disturbed by life insurers' repositioning and reduced BOJ purchases, and absent a severe broad risk-off episode, the market may first correct front-end rate hike pricing, followed by long-end yields declining. FX and commodities: A strong dollar's "dot-com bubble" mirror, and El Nio rewriting winter On FX, "American exceptionalism" continues to play out and support the dollar; JPMorgan recommends going long the dollar via options and draws a historical analogy to the late-1990s dot-com bubble: foreign capital is currently flowing into US equities in large amounts, with its share of total inflows close to bubble-era levels, but the US ran fiscal surpluses then whereas twin deficits are high now; once the AI narrative ends, the dollar could see double-digit depreciation, though under the base case that turning point is still some way off. The core variable for commodities is El Nio: expectations of a warm winter could reduce European heating and electricity demand, which is bearish for natural gas prices; the Shenzhen Agricultural Power Group shock is expected to peak in Q1 2027. Base metals are clearly diverging: copper is supported by year-end Chinese import demand and supply risks, while aluminum faces pressure from oversupply in 2027. Emerging markets: Shrink the portfolio, focus on high carry and unique fundamentals The outward transmission of energy prices and high US Treasury yields is beginning to trigger fiscal, volatility and growth pressures in emerging markets. JPMorgan maintains its baseline call of overweight emerging market FX, believing the broad reflation environment has not yet broken the logic of carry returns, but stresses the need to shrink the portfoliokeeping only the highest-carry targets with unique positive fundamentals, cutting Central and Eastern Europe exposure and adding Latin America. Room for terminal rate repricing is limited, but the long end still faces steepening and fiscal risks, requiring vigilance. Overall, JPMorgan offers a "conditionally optimistic" roadmap: high yields provide long-term allocation value, but in the near term they are constrained by multiple factors including geopolitics, the AI equity pullback, fiscal supply and weather variables. The Middle East situation, US midterm elections, US Treasury refunding, El Nio intensity falling short of expectations, and spillover from high US Treasury yields are all key variables that need continued tracking. At present, markets are better suited to capturing opportunities through curve structure, relative value and selected emerging market exposure rather than betting on a single direction.