Seasonal Tailwinds and Headwinds for DM Government Bonds: J.P. Morgan Rates Strategy

Key Takeaways

• 1.Developed market government bond returns display consistent seasonal trends in the second half of the year, characterized by summer outperformance and post-summer reversals in September and October.
• 2.Seasonality does not generate reliable standalone trading signals because macro drivers and idiosyncratic events often overpower seasonal tendencies in individual years.
• 3.Intra-EMU government bond carry trades over the summer show no compelling historical evidence of seasonal outperformance versus Germany, as political and macro risks frequently trigger sharp underperformance.

Table of Contents

• Methodology
• Government bond returns: some evidence of seasonal regularities across DMs
• Euro area spreads: seasonal strategies are not necessarily profitable

Report data

Figure 1: DM government bond returns exhibit consistent seasonal patterns, especially towards the second half of the year, with more marked effects in the US and Europe.