J.P.Morgan: 3-Year Supply May Require Concession

J.P.Morgan note that Tuesday will see Treasury “auction $50bn 3-Year notes, $2bn smaller than last month. 3-Year yields have risen ~31bp since the January auction and are at their highs for the cycle. The sector appears expensive along the curve after adjusting for the level of rates and the slope of the curve. Additionally, liquidity in the sector remains lower than in neighbouring 2- and 5-Year notes. The 3-Year roll opened at +3.75bp and is trading at +3.0bp. Despite yields trading at their cycle highs and a smaller auction size than last month, we think tomorrow’s auction may require a concession given the richness of the sector along the curve and the weaker liquidity of the sector.”