JPMorgan and Goldman agree for more QE programs to curb bond yields

Central banks may need to increase quantitative easing programs according to an analysis from JPMorgan Chase & Co. The investment firm’s report resonates with the conclusion by Goldman Sachs Group strategists of limiting bond yields.   

The expected increase of this year’s $2.1 trillion supply could offset the $1.9 trillion demand to $200 billion, the JPMorgan team said, implying an upward pressure on yields. Strategists from Goldman Sachs said that an increasing issuance would lead to higher rates and steeper curves.

Policy makers have aimed to force down yields in sovereign markets as governments spend trillions in a bid to put a floor under an economy severely affected by the COVID-19 pandemic.

Despite an upsurge in demand for bonds, JPMorgan reported that appetite could dwindle in 2020 for commercial banks, pension funds and insurance companies, and foreign-exchange reserve managers.

The U.S. Federal Reserve, European Central Bank, Bank of Japan, and the Bank of England will make certain that demand will expand by $4.2 trillion this year. However, commercial lenders will see a decline in demand to around $1 trillion, according to the report.