The outlook appears favorable for spread product in the next three to six months, according to JPMorgan research strategists speaking last Wednesday at the firm's investor conference held at the corporate headquarters in New York. In the second half of 2002, however, Treasury yields may rise rapidly as the Federal Open Market Committee takes a more aggressive credit-tightening stance, reversing gains made early in the year.

Agencies, mortgages and ABS are all favored and should outperform swaps, they said, although swaps will tighten versus Treasury benchmarks, especially in the five-year area, where Treasury supply is expected to grow. While most ABS sectors can not tighten much, they are seen as a smart defensive play, while some opportunities still lie in off-the run names and sectors.

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