At Any Rate Global Rates: Cross currency basis 1H26 outlook
6 snips
Jan 23, 2026 
Ipek Ozil, Head of U.S. Interest Rate Derivatives Strategy at J.P. Morgan, brings market and policy expertise. She discusses Fed policy paths versus market pricing. She explains Fed balance-sheet T-bill actions and effects on dollar funding. She outlines near-term €STR–SOFR basis drivers and seasonal USD issuance patterns.
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Global Bases Largely In Sync
- DM cross-currency bases largely move together, with the first PC explaining ~83% front-end variance and >90% at five years.
- The €STR/SOFR basis is near zero and driven mainly by Fed vs ECB policy differentials plus issuance idiosyncrasies.
Watch Data Before Trusting Cut Pricing
- Markets price ~40–50bp of Fed cuts in 2026, but J.P. Morgan economists expect the Fed to stay on hold.
- Monitor incoming labor and inflation data closely because slow repricing should occur if data align with the economist view.
T‑Bill Purchases To Stabilize Reserves
- The Fed plans reserve-management T‑bill purchases (~$40bn/month to tax day, then $20bn/month) to keep reserves steady near $3tn.
- That liquidity should support money-market and funding conditions and reduce repo stress risk.