J.P.Morgan: 30-Year Supply Likely Requires Above-Avg End-User Demand

J.P.Morgan note that Thursday will see the Treasury "conclude the mid-month supply process with the auction of $23bn reopened 30-year bonds, unchanged in size from the last reopening. The September 30-year auction stopped 0.1bp through pre-auction levels, as end-user demand rose to 78.7%, 7.0%-pts above the previous auction. The allotment details show foreign demand rose 4.8%-pts to 15.7%, while investment manager demand rose 2.2%-pts to 59.1%. Since the last auction, 30-year yields have risen by 11bp to the highest levels since early June, and the 10s/30s curve appears somewhat steep relative to our fair value estimates but within the standard error of the model. Despite the recent backup in yields and modestly cheap valuations, tomorrow's supply will likely require above-average end-user demand to be digested smoothly."