JPMorgan Favors Investment-Grade Corporate Bonds Over Treasuries for Q4 on Improving Supply-Demand Balance

JPMorgan strategists led by Nathaniel Rosenbaum forecast U.S. investment-grade corporate bonds will outperform Treasuries in the fourth quarter, citing slowing issuance from large technology companies, resilient corporate earnings and declining rate volatility. In an Oct. 2 report, the team projected the JULI investment-grade index spread over Treasuries would narrow to 85 basis points from 96 bps, equivalent to the Bloomberg U.S. Corporate Bond Index tightening to 73 bps from 82 bps. Strategists noted yields sit at or near cycle highs while corporate credit fundamentals remain solid, with easing rate swings expected to draw stronger domestic and foreign demand. On supply, large cloud operators may issue roughly $50 billion more in bonds this year, which JPMorgan called marginal against their year-to-date global issuance. The bank estimates about $305 billion in remaining 2026 U.S. investment-grade supply, with the fourth quarter typically the year's lightest. JPMorgan described investment-grade credit as "the best house in a bad neighborhood," arguing corporates benefit more than mortgage-backed or municipal debt from improving operations.