J.P.Morgan: 10-Year Supply Will Require Above-Average End-User Demand

J.P.Morgan note that Thursday will see the Treasury "auction $35bn reopened 10-year notes, unchanged in size from last month. The September auction cleared at 0.704%, 0.8bp cheap to pre-auction levels as end-user demand declined to 72.9%, 4.9%-pts below the prior 3-auction average. The allotment details show foreign demand declined 4.2%-pts to 17.4%, while investment manager takedown rose 4.4%-pts to 52.8%. Since the last auction, 10-year yields have risen by nearly 4bp and remain near their highest levels since late spring. They also appear modestly cheap versus their drivers, though the 10-year sector currently appears fairly valued versus the wings after adjusting for curve and rate levels. Overall, despite the recent backup in yields, we think tomorrow's auction will require above-average end-user demand to be digested smoothly."