J.P.Morgan 20-Year Supply Likely Requires Further Concession

J.P.Morgan note that Wednesday will see Treasury auction “$16bn reopened 20-Year bonds, $4bn smaller than the last reopened auction in January. 20-Year yields have risen approximately 31bp since the February auction but the 20-Year sector has outperformed sharply in recent weeks, and now looks fairly valued along the curve. Though there has been a large outright concession, suggesting supply should be digested easily, realised volatility remains elevated, liquidity remains depressed, and the 20-Year sector no longer stands out as cheap. Thus, we think a further concession is required to absorb digest tomorrow’s auction without incident.”