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J.P.Morgan: 20-Year Supply Will Require Robust End-User Demand


J.P.Morgan note that Wednesday will see "Treasury auction $27bn new-issue 20-year bonds, $2bn larger in size than at the last new-issue auction in August. The October reopening auction cleared at 1.370%, 0.2bp through pre-auction levels, as end-user demand rose 2.5%-pts to 78.5% and now sits 2.3%-pts above its previous 3-auction average. The details show foreign sponsorship declined to 14.1%, while the share of investment manager demand rose to 60.5%, the highest share on record. Twenty-year yields are roughly unchanged since the October auction, but yields first rose to their highest levels since March only to retrace 10bp lower over the past week. Along the curve, the 20-year sector appears modestly rich versus the wings after adjusting for the level of yields and the slope of the curve. Thus, with the recent drop in yields, we think this upsized auction will require robust end-user demand in order to be digested smoothly."

MNI London Bureau | +44 0203-865-3809 |
MNI London Bureau | +44 0203-865-3809 |

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