J.P.Morgan: 5-Year Supply Will Be Digested With Relative Ease

J.P.Morgan note that Wednesday will see "Treasury auction $55bn 5-year notes, $2bn larger in size than last month. The September auction cleared at 0.275%, 0.9bp through pre-auction levels and end-user demand remained elevated. More granularly, the investment manager takedown rose to 56.9%, while foreign demand declined to 17.7%. Since the September auction, 5-year yields have risen by 6bp and the five year sector appears modestly cheap versus the wings after adjusting for the level of rates and the shape of the curve. The WI 5-year roll opened at +0.875bp, in line with our fair value estimate, and is still trading at that level. Given the recent increase in yields and relative value along the curve, we think tomorrow's supply will be digested with relative ease despite the larger auction size."