J.P.Morgan: 2-Year Supply Will Be Digested With Relative Ease

Ahead of Tuesday's 2-Year auction J.P.Morgan note that the amount on offer is "$2bn larger in size than last month. The July 2-year note auction cleared at 0.155%, 0.8bp cheap to pre-auction levels as end-user demand declined 8.1%-pts to 60.7%. More granularly, the investment manager takedown decreased 8.6%-pts to 44.8% and foreign demand declined 0.8%-pt to 11.8%, the lowest level since August 2019. Since the July auction, 2-year yields are roughly unchanged, as the market continues to price a Fed on hold for more than three years, and we expect front-end yields to continue to trade in a tight range. The WI 2-year roll opened at even, in line with our estimates, and is now trading at -0.125bp, outperforming the erosion of carry. Despite the increase in auction size, we think tomorrow's supply will be digested with relative ease."