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

J.P.Morgan note that Thursday will see Treasury auction “$22bn 30-Year bonds, $1bn smaller than the last new-issue auction in February. 30-Year yields have risen 34bp since the April auction and are sitting at their highest levels since the fall of 2018. Moreover, as we have highlighted recently, long-term yields appear too high after controlling for their fundamental drivers and the long end is too steep after adjusting for the market’s medium-term Fed expectations. All else equal, this should be supportive for tomorrow’s auction. However, as we have stressed recently, liquidity remains depressed and risk appetite remains light amid high volatility. Thus, we think it will require above-average end-user demand to underwrite this supply smoothly.”