GlobalMacroResearchMay19th,2025

GlobalMacroOutlookandStrategy

GlobalRates,Commodities,CurrenciesandEmergingMarkets

LuisOganesAC(44-20)7742-1420

luis.oganes@

J.P.MorganSecuritiesplc

Seetheendpagesofthispresentationforanalystcertificationandimportantdisclosures.

Overallsummary

USRates

nWeadjustedhigherourTreasuryyieldforecastandnowsee10-yearyieldsreaching4.35%byyear-end,upfrom4.00%previously.Weremain

neutralondurationbuthold2s/5ssteepeners.Weexpectminimalimpactonyieldsifthereconciliationbillispassed.Thedeficitimpactisestimatedtobesmallrelativetothe$21tnofprojecteddeficitsinthecurrentlawbaseline.Meanwhile,the5s/30scurvehasalreadysteepeneddramaticallyversusfundamentals,andthetechnicalbackdropappearsmorebenign.

nWerevisehigherourbreakevenforecastsacrossthecurveto225bpbyyear-end.Maintain10Yx20Yinflationswaplongsgivenattractivevaluations

InternationalRates

nDMyieldssoldoffatthestartoftheweekasUS/Chinadeliveredamoreconstructiveoutcomethanexpectedovertheweekend;however,someofthemovewasretracedlaterintheweekalsoamidweakerUSdata

Commodities

nResilienceincrudeandrefinedproductpricesandcracksisanticipatedtopersistthrough2Q25beforedeterioratinginthesecondhalfoftheyear.NWEstoragelevelsincreasedto~39.2%full.Welowerourpriceforecastsfor2Q25and3Q25to35EUR/MWh,aligningwiththecurrentforwardcurve,downfromourpreviousestimatesof40/45EUR/MWh.

nTariff-drivencutstoeconomicgrowthforecastsandanincreasedprobabilityofrecessionthisyeartranslatetosteepcutstobasemetalsdemandforecasts,alleviatingpressurefromsupplyconstraintsinaluminumandcopper.Ourmodelsuggests,redirectingjust0.5%offoreignUSasset

holdingstogoldcoulddrivepricesto$6,000.Agrisupplychainsremainonedge,withprohibitivetariffratesblockingtradebetweentheUSandChina,drivingfundamentaldiscountstoemergeacrossmanyfuturesmarkets.

Currencies

nWestickwithourstrategicweaker-dollarcallinthewakeoftheUS-Chinatariffde-escalation.USmoderationcancontinue,albeitwithlesser

intensity,andlowertariffriskpremiumsupportsglobalgrowthwhichkeepsthemiddleoftheUSD-smileinplay.FX/cross-assetcorrsstartingto

normalize.PositioningremainsmoreofariskforJPYthanUSD.USfiscalnewssuggestspossiblymorethrustthanexpected,butnotfinalyet;USDtoweighgrowthvstermpremiumimplications.

EmergingMarkets

nAfterasqueeze,EMpricingagainlooksatoddswiththedownsiderisksfortheglobaleconomyandtariffimpact.

nStayUWEMsovereignsandcorporates,butcutUWEMFXtoMWonshiftingUSDdrivers;stayMWEMratesbutwithfrontendreceivers.

1

2

Agenda

Page

1

USRates:Fiscalpolicytakescenterstage

2

2

InternationalRates:Progress,yetchallenges-stayOWEuropeanrates

9

3

FX:Well,thatde-escalatedquickly

15

4

Commodities:Higherbaseandlowergas

22

5

EmergingMarkets:StayUWEMsovereignsandcorporates,butcutUWEMFXtoMW;stayMWlocalrates

28

6

Appendix

34

WereviseupourTreasuryyieldforecaststoreflectlaterandshallowerFedeasing

3

J.P.MorganUSinterestrateforecast,%

Source:J.P.Morgan

FedfundsratebyFOMCmeetingdateimpliedbyOIScurveversusJPMforecast;%

Source:J.P.Morgan

?Lookingahead,giventhesignificantde-escalationinthetradewarwithChina,wenowprojectrealGDPgrowthforthisyearat0.6%(4Q/4Q),upfrom0.2%previously,corePCEinflationendingtheyearat3.5%,downfrom4.0%previously,andafirstFedcutinDecember,versusSeptemberpreviously.AfterDecember,weseeafurtherthreesequentialcuts,takingthefundsratetargetrangeto3.25-3.5%by2Q26

?Againstthisbackdrop,werevisedupourTreasuryyieldforecastsearlierthisweek,andwenowsee2-yearTreasuryyieldsendingtheyearat3.50%,versus3.10%previously.Wealsoforecast10-yearyieldswillendtheyearat4.35%,upfrom4.00%previously

4

Westoppedoutof2-yeardurationlongsandturnedneutralonduration,butmaintain2s/5sUSTcurvesteepener

CumulativeFedeasingpricedbyYE2026;bp

Source:J.P.Morgan

2s/5sTreasuryyieldcurve;bp

Source:J.P.Morgan

?Giventheshiftinfundamentaloutlookaswellaslingeringrisks,westoppedoutof2-yeardurationlongsearlierthisweekandturnedneutralonduration

?Thatsaid,wemaintain2s/5scurvesteepeners—wethinkthisexposureoffersasymmetricupsideinthecurrentenvironment,asthecurveislikelytosteepensharplyintheeventthatadeteriorationinlabormarketdataovercomingmonthsdrivesmarketexpectationsofdeeperratecuts

5

Thebroadyieldcurveislikelytoremainsensitivetodevelopmentsonthefiscalpolicylandscapeoverthenearterm

Deficitimpact(includinginterest)byfiscalyear*;$bn

*2025and2026numbersareuncertainandhighlydependentontimingofstudentdebtpolicies.

Source:“AddingUptheHouseReconciliationBill.”CRFB,CBO,JCT,andHousecommittees

5s/30scurveversusJ.P.Morganfairvaluemodel*;bp

*Modelregresses5s/30scurveon1Yx1YOISrates(%),5Yx5Yseasonally-adjustedTIPSbreakevens(%),andFedbalancesheetasashareofUSGDP(%);Regressionoverthelast3years;R^2=84.1%;SE=10.1bp

Source:J.P.Morgan

?Awayfromthefrontend,thebroadyieldcurveislikelytoremainsensitivetodevelopmentsonthefiscalpolicy

landscapeoverthenearterm.Thus,withrespecttodeficit-financingneedsoverthenextfewyears,theimpactoftheHousebill,ifpassed,wouldbesmallrelativetoourcurrentassumptions

?Thus,basedonthedetailedscoringfromCRFBandtheJCT,oureconomistsestimatethatthebillwouldcreateroughly$265bnoffiscalthrustinFY26(0.9%ofGDP)ifpassedaswritten

6

FollowingMoody’sratingdowngradeofUSdebt,risksareskewedtowardsabearishsteepeningoverthenearterm,andcheapeningofASWoverlongerterm

Cumulativechangein10-yearTreasuryyieldsinthetwoweeksafterUSsovereignratingsdowngrades*;bp

*Datesused:8/2/11,8/1/23Source:J.P.Morgan

30-yearmatched-maturitygovernment/OISspreadsforvariousDMcountriesregressedonratingsrank*;bp

*RatingrankisbasedonMoody’s,S&P,andFitchratings.Weassignarankof1toAaa/AAA,andincreasetherankby1foreverynotch

downgrade(i.e.Aa1/AA+=2etc.).Weaverageratingsrankacrossthethreemajorratingsagencies

Source:S&P,Fitch,Moody’s,J.P.Morgan

?AfterthecloseonFriday16May,Moody’sdowngradedtheUStoAa1fromAaa:theUShasnowlostitslastremainingtriple-Arating,asthisactionfollowssimilar

?Giventradepolicyandmonetarypolicyuncertaintyamidastructuralshiftinthedemandlandscape,therisksareskewedtowardbearishsteepeningoverthenearterm.Totheextentthisannouncementwasnotunexpected,andwithinvestorpositioningmoreneutralthanitwasinearly-April,wewouldexpectsignificantlysmallermovesthanexperiencedlastmonth

?Overthelongerterm,thisdowngradewilllikelyresultinhigherinterestexpense,astheone-notchactionshouldcheapenTreasuriesrelativetomatched-maturityOIS

7

Foreigninvestorsownroughly30%oftheTreasurymarket,andforeignofficialholdingsarepredominantlyshort-dated

Ten-yearTreasuryyields(%,3mMA)regressedonrealFed

fundsrate(%,3mMA)*,andglobalFXreservesallocatedinUSDasashareofUSnominalGDP(%),regressiononquarterlydatafrom2Q10–1Q25

ShareofforeignholdingsofTreasuriesbymaturitybucket*asof6/30/24;overallcomparedwithforeignofficialandforeignprivate,%

*Fedfundsratelessover-year-agocoreCPI

Source:FederalReserve,IMF,J.P.Morgan

*PartsmaynotsumtototalassomebondshaveunknownmaturitiesSource:TreasuryInternationalCapitalSystemAnnualReport

?Foreigninvestorsownroughly30%oftheTreasurymarket,splitapproximatelyevenlybetweenprivateandofficialsectors.

Holdingsarepredominantlyshort-datedinnature,suggestingofficialinstitutionscouldlettheirholdingsrunoffornotreinvest.

?Weobservethat5-yearyieldstendtorise33bpforeach1%-ptinforeignholdingsrelativetoGDP(orapproximately$300bnTreasuries),onceholdingrealpolicyrates.

8

TreasuryiswellfundedthroughFY25,butalargegapbeginstoemergeinFY26;weexpectcouponsizeincreasestobegininFebruary2026

USTreasurynetcouponborrowingcapacity*versustotalfundingneeds**,$bn

*AssumescurrentauctionschedulethroughFY29andincorporatesborrowingcapacitycreatedbySOMAreinvestmentsassumingTreasuryQTrunsatcurrentpacethroughMarch2026

Source:USTreasury,CBO,J.P.Morgan

J.P.Morganprojectionofnetprivately-heldborrowing,FedpurchasesofTreasuries,andexpectedchangeinTreasuriesheldbyprivateinvestors,$bn

Source:USTreasury,J.P.Morgan

?AcombinationofCOVID-erastimulusdebtmaturitiesandawideningfiscaldeficitfollowingtheextensionoftheTCJA+otherelectionpromisesissettoleavetheTreasuryunderfundedbyitscurrentcouponauctionscheduleinFY26

?AtthemostrecentrefundingannouncementTreasuryretaineditsforwardguidancethatitdoesnotexpectcouponauctionsizeincreasesfor“foratleastthenextseveralquarters”.WelookthreequartersofauctionsizeincreasesstartinginFebruary2026…

?…leavingtheT-billshareofdebtelevated.Treasuryremainedcommittedtobeing“regularandpredictable”,notseekingtoactivelyshortenitsWAMorincreasethesizeofitsbuybackoperations

9

Agenda

Page

1

USRates:Fiscalpolicytakescenterstage

2

2

InternationalRates:Progress,yetchallenges-stayOWEuropeanrates

9

3

FX:Well,thatde-escalatedquickly

15

4

Commodities:Higherbaseandlowergas

22

5

EmergingMarkets:StayUWEMsovereignsandcorporates,butcutUWEMFXtoMW;stayMWlocalrates

28

6

Appendix

34

10

DMyieldssoldoffatthestartoftheweekasnegotiationsbetweentheUSandChinaresultedina90-daytrucewithreducedtariffsrates

ChangesinGilt,Treasury,BundandJapanyields;Since9May,bp

Source:J.P.Morgan.

OISpricingfornextcentralbankmeeting,end-2025andterminalratesvs.JPMforecastsforECB,FedandBoE;

bp

Source:J.P.Morgan.

?DMyieldssoldoffatthestartoftheweekasnegotiationsbetweentheUSandChinaovertheweekendresultedina90-daytrucewithreducedtariffsrates,amoreconstructiveoutcomethanwhatwasbroadlyexpected.However,theinitialknee-jerksell-off

movewaspartlyretracedlaterintheweekalsoamidweakerUSdata

?Ondedollarisation,wenotethatthereislittleanecdotalevidenceofactualsellingflowsofUSTreasuriessofarwithdemandfornon-USgoviesalsodependentontheattractivenessofcurrencyhedgedyieldpickup

?Intermsofstrategy,wecontinuetoholdlongsintheEurospaceatthefrontendofthecurveand10YGermany.IntheUK,westaylongNov25MPCOISandhaveatacticalbullishdurationbiason10Y.Enter3s/10sItalysteepenervs.

GermanyandstayOW10YSpainvs.ItalyandGermanyinweightedflyasrisk-offhedges.IntheUS,thisweekwehadstoppedoutoflong2YTreasuriesandturnedneutralonduration,althoughwecontinuetohold2s/5ssteepenersasahedgeagainstriskoftheFedhavingtoeasemore

Euroarea:maintainastrategicOWdurationstanceandhold1Yx1Y€STRreceiverandlong10YBunds;continuetoholdlow-betabullishdurationproxies

1Yx1Y€STRyield;Since1Jan2025;bp

Source:J.P.Morgan

Residualfromregressing2s/10sGermanparcurveagainst1Yx1Y€STRrate,ECBbalancesheetas%ofGDP*;

SinceJan24,bp

*2s/10s=-0.42*1Yx1Y€STR–14.0*ECBbalancesheet+6.9;R-squared:88%.Source:J.P.Morgan.

?Despitethisweek’sUS-Chinatradewarde-escalation,westillremaincautiousontheglobalandEuroareamacrooutlookoverthemedium-term.Whileoureconomists’modalviewnowlookstobeshiftingtoweakglobalgrowthratherthanrecessionover2025,therisksarestillskewedtothedownside

?Wecontinuetorecommendreceiving1Yx1Y€STRoncheapvaluationsgivenourviewthatriskstogrowthandinflationremaintothedownsideintheEuroarea.Wealsoholdotherbullishdurationproxiesinourportfolio:1)6Mx2YspreadversusOTMpayer,2)Jun25Schatzcallfly3)reds/bluesconditionalbullsteepenervia3Mmid-curvereceivers

?Westaylongon10YGermanywithyieldscloseto2.60%(vs.oursub-2.50%forecastbyend2025)giveni)ongoingECBpolicyeasing,ii)furtherremovaloftermpremiapricing,iii)improvingstructuraldemandforEGBonde-dollarisationtheme,iv)positivecarryandv)risksofdelaystoGermanfiscalspending11

Euroarea:turnneutralonintra-EMU/€-SSAspreads.WewaitforbetterentrylevelstoscaleintoOWcarryexposuresandholdrisk-offhedges

Statisticsof10YbenchmarkspreadtoGermany;Bp

Source:J.P.Morgan

Decompositionof10Ywtd.peripheralspreadbasedonJ.P.Morganfairvalueframework;

bpunlessspecified

Source:J.P.Morgan.*10YweightedperipheralspreadscomputedagainstGermanyfor

Ireland,Portugal,ItalyandSpain(weightedbythesizeoftheiroutstandingbondmarket).**WefloortheEuroareacompositePMIat45(thelowsintheseriessince2011excludingthelowsduringearlyCOVID-19period),tocleanfortheexcessivelynoisyandsharpdeclines

duringpeakofCOVID-19periodofMar-May2020.***PEPP+NGEUsafety-netdummyis

definedas1sinceMarch2020and0previously.PEPPwasannouncedinMarch2020andNGEUwasannouncedsoonafteraroundsummer2020.****TPIsafetynetdummyisdefinedas1sinceJune2022and0previously.TPIwasannouncedinJune2022

?Weneutralizeourcautiousstanceonintra-EMU/€-SSAspreadsasrecentUS-Chinatradedevelopmentshavereduced

tariff/macrouncertaintyoverthenearterm.WedonotfindOWcarryexposuresattractiveyet,apartfrominsmallercore

sovereigns,andwaitforbetterentrylevelstoscaleintocarrytrades.Atthesametime,westillfindvalueinkeepingattractiverisk-offhedgesintheportfolio

?Riskoff-hedges:enter3s/10sItalysteepenervs.Germanyandkeepshort3YFrancevs.Germany

?Hold30s/50sFranceflatteneronsteepvaluationsandconvexitybenefitsandkeeplongsin10YSpainvs.10YItaly(50%)and10YGermany(50%)risk-weightedfly

12

UK:Weturnbullishatthefront-endviaNov25MPCOIS

13

CurrentspotandforwardSONIAlevelsandprojectionsunderdifferentBankRatescenarios;

bp

Source:J.P.Morgan

5Yand10YgiltprojectionsunderdifferentBankRatescenarios*

bp

Source:J.P.Morgan

**BankRatescenarios:Basecase(55%)3.50%1Q26,downsidegrowth(30%)3.00%Dec25,incompleteeasing(15%)4.00%Dec25

?Domesticdatashowedanongoinggeneralsofteninginthelabourmarketbutwithasurprisingstrong1QGDPprint,withparticularstrengthinbusinessinvestment

?WecontinuetoreceiveNov25MPCOISwithjustover40bpofeasingpricedbythen.WethinkthereisenoughevidenceofongoingdisinflationinpricesandwagesfortheBoEtodelivertwofurthercutsthisyear

?1Yx1YSONIAlooksmodestlycheapvs.ourbasecaseBoEscenariovaluationforecast.Giventhis,andwithintermediateyieldsalsomodestlycheapvs.ourbasecasescenario,weshifttoatacticalbullishbiason10Ydurationwith10Ygiltyieldsaround15bpaboveour2Q25targetof4.45%

14

InternationalRatestraderecommendations

Euroarea

?Euroduration:Keeplong10YGermany.Neutralizecautiousstanceonintra-EMU/€-SSAbutwaitforbetterentrylevelstoscaleintoOWcarryexposures.

?Intra-EMU:Weareneutralonintra-EMU/€-SSAandholdrisk-off

hedges.Enter3s/10sItalysteepenervs.Germanyandkeepshort3YFrancevs.Germanyasrisk-offhedges.HoldOW10YSpain(100%)vs.10YItaly(50%)and10YGermany(50%)weightedfly.

?Derivatives:Stayreceived1Yx1Y€STRandholdlongduration

proxies:1)107.7/107.9/108.1Jun25Schatzcallfly,2)6Mx2Y

receiverspreadversusOTMpayer,and3)reds/bluesconditionalbullsteepenervia3Mmidcurvereceivers.Keepsteepeningbiasin

10s/30sswapcurve,2Yx2Y/10Yx10Yisanattractiveproxy.Hold1Yx(10s/30s)YCSOcurvecapfly(A/A+20/A+40)asmediumtermtrade.WideningbiasonSchatzspreadsbutwaitforbetterentry

levels.Bundspreadnarrowersareattractiveonmedium-term

considerationsbutwestayneutralandkeepBundbullwidenersasrisk-offhedges;rotateexposurefromJun25intoJul25options.

Reduceshortvolatilityexposure;takeprofitinshort1Yx2Yunhedgedstraddlesbutstayin3Mx2Yunhedgedstraddles.

UK

?UK:WecontinuetoreceiveNov25MPCOIS.Tacticalbullishbiason10Ygiltswithyields15bpabove2Q25forecasts.Hold2s/10sconditionalbullsteepenervia3Mreceivers.

Scandinavia

?Sweden&Norway:WekeepreceivingDec25SEKFRAswhichwebelieveofferasymmetricupside,andcrossmarket-paying5Yx5Y

StiborversusEuribor.

Japan

?Japan:Maintainaconstructiveviewon2to10YJGBswhileremaincautiousonsuper-longJGBs.

Antipodean

?Australia&NewZealand:ClosethepaidNov’25RBAOISvs

receivedOct’25FOMCOISexpression,andtheNZD-AUD1Yx1YIRSspreadnarrower.PayOctober‘25RBNZOIS.Holdthe1s/3sBBSW-SOFRbasiscurvesteepener

15

Agenda

Page

1

USRates:Fiscalpolicytakescenterstage

2

2

InternationalRates:Progress,yetchallenges-stayOWEuropeanrates

9

3

FX:Well,thatde-escalatedquickly

15

4

Commodities:Higherbaseandlowergas

22

5

EmergingMarkets:StayUWEMsovereignsandcorporates,butcutUWEMFXtoMW;stayMWlocalrates

28

6

Appendix

34

Stickingwithourstrategicweaker-dollarcallinthewakeoftheUS-Chinatariffde-escalation

16

SPX(LHS)andUSDTWI(RHS)

Source:J.P.Morgan

RealGDPgrowthoyachange:2025projectionsminus2024

Source:J.P.Morgan

?ThedollarhaslaggedthemoveinUSequities;wethinkthisisjustified.Webelieve:

?USmoderationisstillintact,justlowerintensity.Sometrade-wardétenteimprovesUSprospects-butasdetailedbyoureconomists-stillpresentsamaterialstep-downfromactivityayearago.

?LowertariffriskpremiumimprovesnotonlytheUSgrowthoutlook,buttheglobaloutlookaswell.SeeourEuro-arearevisions,forexample.Thatstilltiltstowardsamid-smileenvironmentthatcanfavorcyclicalFX.

?Policyuncertaintywillendure,againstabackdropofstill-largeforeignholdingsofUSassets.Anyreallocationand/orchangesinhedgingbehaviorislikelystillintheearlyinnings.

LesstariffintensityshouldalsorevertFXmarketfocusbacktodata

17

USD1mrollingcorrelationwith5Yrates(dailychgs)

Source:J.P.Morgan

5Yrealyields(%)

Source:J.P.Morgan

?Itstandstoreasonthatlesstariffintensityshouldrefocusmarketmindsondata,moresothanthepolicy.TheUSD’sevolvingcorrelationssuggestthismaybestarting.

?Oneofthehallmarksofthepost-LiberationDayFXlandscapehasbeenthebreakdowninotherwise-historicallyreliableFXcorrelations,mostnotablyvsrates.

?Thatsaid,withthecalmingofthetradewar,thedollarshouldbeabletorevertbacktowardsabitmoredatadependence-whichwouldbeconsistentwiththerecentsofteningintheUSD’snegativecorrelationtorates,justaswe’vepushedourFedcallbacktoDec.

USdeficits&thrustpossiblyhigherthanexpected,mixedimplicationsforUSD

18

CumulativeDXYm/mreturnsacrossratesscenarios(2Y&10YACMTermPremium)

Source:J.P.Morgan,BloombergFinanceL.P.

InformationRatio(avgreturn/stddev)

DXYreturnsacrossratesscenarios(2Y&10YACMTermPremium)

Source:J.P.Morgan,BloombergFinanceL.P.

?NewnewssuggeststhattheriskstotheUSfiscaldeficit-asdraftedinthelegislation-skewtowardswidening,

implyingsomeunexpectedfiscalthrust.Whileagrowthsupportmayemerge,itmaybeagainstthebackdropofhighertermpremium.

?IftheUSisstillmoderatingdespitegovernmentfiscalsupportandtheshort-endisfallingbuttermpremiumisrising-thedollarislikelytofall

?Indeed,suchconditionshavebeenclearlyondisplayin2025,andthatcombination(2Y↓,termpremium↑)hasthehighestsharpratioofthevariousratespermutations.

EUR:Bullishwithsightson1.20byyear-end

19

EuroStoxx/SPXvs.EUR/USD

Source:J.P.Morgan

6mrollingcorrelationbetweenS&P500andEUR/USDbasedon1-week%changes

Source:J.P.Morgan

?OurforecastsenvisageEUR/USDgraduallyapproaching1.20-1.22bytheturnoftheyear.

?Theprimarymedium-termreasonstobebullishEUR/USDare:(a)USmoderationvs.Eurozonehasmoreroomtorun.(b)US

equitiesre-balancingshouldcontinuetoweighonthedollarvs.thelargestholdersincl.(c)Europeanfiscalpolicywillbeaninsulator.

(d)higheroddsofastructuralUSDweakeningincomingyears.

?Ourconcernontheeuroinrecentweekshasbeentherelativeunderperformanceofequitiesvs.theUS,whichcouldsignal

thatUSexceptionalismisstillintactonsomemeasures;ifthisextendsfurther,wewouldbemoreconcernedfortheeurobullishview.

JPY:RemainbearishUSD/JPYamidUSmoderation,butlimitedbyrealpolicyrates

20

SectorbreakdownofJapaneseforeignsecuritiesholdings(asofend-2024)

J.P.MorganforecastsfortheU.S.andJapan’spolicyratesandUSD/JPYtargets

Source:J.P.Morgan

Source:BoJ,J.P.Morgan.

?GivenbroadUSDweaknessduetouniquefactorsrelatedtotariff,itislikelythatUSD/JPYwillundershootitsfairvaluebasedontheU.S.andJapanmonetarypoliciesandwilltestacyclelowat139.

?WecontinuetothinkJapan'sdeeplynegativerealpolicyrateswilllimitthedownsideoftheUSD/JPYinthemediumtolongterm.Unlikepastrecessions,Japan'srealpolicyratesarelikelytoremainsignificantlynegative.Inaddition,Fedfundsrateisunlikelytogetnearto0%asitdidinpastrecessions(2007-09,2020).

?Wedonotexpectsignificantimminentdedollarization:FXreservesneedUSDassetsduetopolicyobjective,GPIFallocationisunchanged,lifers’plansforFY25donotsuggestaccelerationinunwindingFX-unhedgedbondspositions,andweseeretail

investorsarestructuralbuyersofforeignassetsbutwithlowallocation

?USD/JPYforecasts:2Q142,1Q’26139

CNY:NeutralisingCNHshorts;lowerUSD/CNYtarget

21

OurtrackingoftheriskpremiumpricedintoacrosssectionofChina-linkedassets,andChinaEASI

Source:J.P.Morgan

Weeklydividendpayouts,$bn,JPMebasedoffBloombergdata

Source:J.P.Morgan

?DespitethetariffceasefirebetweenUS-China,theriskpremiumpricedintoacrosssectionofChina-linkedassetsindicates

thatinvestorsareyettounwindtheirbearishpositionspostthedeal,withmarketpessimismstayingatrecentmonthlyhighs.

?WenowseedownsideriskstoourcurrentUSD/CNYforecastsonpotentialrecoveryofexportflowsinthenearterm.Thatsaid,wethinkthebarforUSD/CNHtorepeattheSept-24collapseto7.0remainsarguablyhighatthispoint.

?ThedownshiftinUSD/CNHwillalsoneedtobattlewithupcomingseasonalheadwindsasdividendpayoutsfromHK-listedChinesefirmsarescheduledtopickupmeaningfullyfromlate-Mayonwards.Accordingtoourestimates,dividendpayoutscouldamountto~$60bnforMaytoAugust,withnearly70%oftheflowsconcentratedbetweenmid-MaytoJuly.

?FXforecasts:2Q:7.20(7.45),4Q:7.30(7.60)

22

Agenda

Page

1

USRates:Fiscalpolicytakescenterstage

2

2

InternationalRates:Progress,yetchallenges-stayOWEuropeanrates

9

3

FX:Well,thatde-escalatedquickly

15

4

Commodities:Higherbaseandlowergas

22

5

EmergingMarkets:StayUWEMsovereignsandcorporates,butcutUWEMFXtoMW;stayMWlocalrates

28

6

Appendix

34

23

OilMarkets:Resilienceincrudeandrefinedproductpricesandcracksisanticipatedtopersistthrough2Q25beforedeterioratinginthesecondhalfoftheyear

Globaltotaloildemandnowcaster

mbd

Source:Woodmac,EIA,IEA,Rystad,Kpler,IIR,S&PGlobal,J.P.MorganCommoditiesResearch

Globaloilliquidsinventory

Millionbarrels

Source:Kpler,DOE,IEA,SingaporeEnterprise,ARAPJK,PAJ,Eurooilstock,OilChem,J.P.MorganCommoditiesResearch

?DemandweaknessemergedinAprilandextendedintoMay,leadingtoabuildupinglobaloilliquidsstocks.Yet,despitea22%declineincrudepricessincemid-January,refinedproductpricesandrefiningmarginshaveremainedsteady,whileUSgasoline

cracksandpromptspreadshavesurged.

?ThepatternofrefinerycapacityclosuresinEuropeandtheUSisdrivingthedivergencebetweencrudeandrefinedoilproductmarkets.Reducedrefiningcapacityistighteninggasolineanddieselbalancesintheseregions,increasingtheirrelianceonimportsandraisingtheirsusceptibilitytopricespikesduringmaintenanceandunplannedoutages.

24

NaturalGas:Reducedstoragetargetsdrivepriceadjustments—revisingSummer-25Europeanpriceslower

Lower48Production

Bcf/day

Source:WoodMackenzie,J.P.MorganCommoditiesResearch

NorthwestEuropenaturalgasstorage

%full

Source:GIE,AGSI,BloombergFinanceL.P.,J.P.MorganCommoditiesResearch.Dataasof17May2025.

?TheconceptofsupplyinsecurityiscurrentlyatplayfortheUSnaturalgasmarketandaddedcomplicationofTrumptariffs

increasingthechanceofaUSrecessionthisyearto60%,wedonotfeelcomfortableinraisingourpriceforecasttothecurrentforwardcurveandevenbeyonditwithalltheuncertaintythatthisnewriskfactorhasintroducedforUSnaturalgas.

?AssumingnormalsummerweatherconditionsacrossAsiaandotherregions,EuropeanstorageemergesastheprimarydriverofLNGdemandgrowthin2025.ProposedamendmentstostorageregulationswillhelpalleviateEurope’sLNGrequirements.

Consequently,welowerourpriceforecastsfor2Q25and3Q25to35EUR/MWh,aligningwiththecurrentforwardcurve,downfromourpreviousestimatesof40/45EUR/MWh.

25

BaseMetals:Better-than-expectedUS-Chinatradereprievereducesrecession

probabilities,diminishingdownsidetailriskstobothbasemetalsdemandandprices

Chineserefinedcopperdemandgrowth

Percentchangeyoy,quarterly

Source:CRU,BGRIMM,J.P.MorganCommoditiesResearch

Globalaluminumingotpremiums

LHS:US$/t;RHSUSc/lb

Source:CRU

?Whilepricescouldcontinuetorunhigherinthenear-term