JPMorgan names the global winners from rising bond yields — and some stocks are ‘very cheap’

Published Wed, Mar 31 20212:04 AM EDT

Lucy Handley @in/lucy-handley-b2b0a61a/@lucyhandley

Wall Street bank JPMorgan expects bond yields to keep going up, and has named more than a dozen stocks that are set to benefit. The U.S. 10-year Treasury yield reached 1.77% on Tuesday — boosted by forthcoming infrastructure spending and coronavirus vaccine rollouts — a level not seen since January 2020. Analysts at the bank expect that benchmark interest rate to reach 1.95% by the end of the year and they say a raft of global stocks will be able to withstand these higher yields — with one sector trading "very cheap," per a research note published Monday. These are the bank's top picks, which have an estimated dividend yield of at least 3% and are all expected to outperform: Energy BP is JPMorgan's pick in the sector, with an estimated dividend yield of 5.3% for the year. Materials Belgian firm Solvay is a pick for the bank, which estimates a dividend yield of 3.6%. Mining firm BHP Group is also on the list, with an estimated dividend yield of 8.5%. Industrials JPMorgan's industrials pick is Austrian plant supplier Andritz , with an estimated dividend yield of 3.5%. Discretionary British real estate firm Barratt Developments is a pick for the bank, with an estimated dividend yield of 3.2%. Staples French grocery story Carrefour is a pick for JPMorgan with an estimated dividend yield of 3.5%. Health care The bank chose pharmaceuticals company Sanofi , with an estimated dividend yield of 4%. Financials JPMorgan picked several stocks in the financial sector: French bank Societe Generale , with an estimated dividend yield of 4%, Dutch firm ING with an estimated yield of 7.1%, fund manager Jupiter (6.2%), insurance firm Ageas (5.5%), investment firm M & G Group (8.5%) and French group BNP Paribas (5.8%). Telecoms The sector is JPM's "cheap" pick. "Telecoms have had an extremely poor run in the past few years. The sector is trading at record low valuations," the analysts wrote. "The sector was at price relative lows, very cheap and underowned," they stated, adding that the sector is likely to benefit from the economy reopening via roaming charges and an uptick in sports. The bank picked German media firm ProSiebenSat.1 Media and estimated its dividend yield at 3.8%. It also chose British group Vodafone Group , with an estimated dividend yield of 5.7%. Utilities In utilities, French energy company Engie is a pick, with an estimated dividend yield of 6.1%, along with Italian firm Enel (4.5%) and Portuguese business EDP (4.0%). JPMorgan is "overweight" on all of the stocks listed, and argued that its picks will continue to rise with bond yields. "We continue to believe that the greater risk to equities comes from falling bond yields, rather than rising yields. Case in point, earlier last week yields went down, and stocks were lower, keeping the positive correlation intact," its analysts stated. Yields fell slightly last Wednesday as Federal Reserve Chair Jerome Powell addressed Congress. "There is a view out there that stocks are up predominantly because of falling yields, but we do not see it this way. The correlation between equity prices and bond yields has been firmly positive during the market recovery since last March," the analysts said. —CNBC's Vicky McKeever contributed to this report.

The U.S. Treasury building in Washington, D.C., on Friday, March 19, 2021.

Samuel Corum | Bloomberg | Getty Images

Wall Street bank JPMorgan expects bond yields to keep going up, and has named more than a dozen stocks that are set to benefit.

The U.S. 10-year Treasury yield reached 1.77% on Tuesday — boosted by forthcoming infrastructure spending and coronavirus vaccine rollouts — a level not seen since January 2020.

Analysts at the bank expect that benchmark interest rate to reach 1.95% by the end of the year and they say a raft of global stocks will be able to withstand these higher yields — with one sector trading "very cheap," per a research note published Monday.

These are the bank's top picks, which have an estimated dividend yield of at least 3% and are all expected to outperform: