JPMorgan Predicts High-Grade Corporate Bonds Will Outshine Treasuries in Q4

JPMorgan strategists led by Nathaniel Rosenbaum have forecast that US investment-grade corporate bonds could outperform Treasuries in the fourth quarter of 2026. They anticipate the JULI index spread to narrow to 0.85 percentage points from the current 0.96, while the Bloomberg US Corporate Index is expected to tighten to 0.73 points from Friday's 0.82.

The bank's optimism is grounded in several factors, including slowing sales among major tech firms and robust corporate earnings. The strategists also highlight stabilizing interest rate movements and increased demand from both domestic and international buyers as yields find a balance. They describe the current environment as one where 'yields are at or close to fresh cycle highs, credit fundamentals are in very good shape and the supply & demand balance should improve throughout Q4.'

From a supply perspective, JPMorgan estimates that approximately $305 billion in corporate bond issuance remains for the year, with an additional $50 billion potentially coming from hyperscalers. Despite the potential for more issuance, the firm views this as manageable given the overall market conditions.

For investors, the strategists argue that US high-grade corporate bonds represent the 'best house on a bad block,' suggesting that the current higher yields, supported by strong economic growth, are more beneficial for corporate profits than for other asset classes like mortgage-backed securities or municipal bonds. This outlook could drive tighter spreads in the coming months.