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

J.P.Morgan note that Tuesday will see Treasury auction"$54bn of 2-year notes, $2bn larger in size than last month. The September auction cleared at 0.136%, 0.3bp cheap to pre-auction levels as end-user demand declined 4.7%-pts to 66.6%. More granularly, the investment manager takedown declined to 45.5% and foreign demand declined to 18.0%. Since the September auction, 2-year yields are 1bp higher and have continued to trade in a tight range. The WI 2-year roll opened at +0.125bp, in line with our fair value estimate, and remains at that level, modestly underperforming the erosion of carry. Despite the increase in auction size, we think tomorrow's supply will be digested with relative ease."