J.P.Morgan Believe 30-Year Supply Will Need Above Avg. End User Demand

J.P.Morgan note that Tuesday will see the "Treasury auction $24bn reopened 30-Year bonds, unchanged in size from last month's reopening. 30-Year yields are about 15bp off their lowest levels from last week, but have still declined 17bp since the June auction, and the 10s/30s curve appears too flat after adjusting for the market's Fed, and budget deficit expectations, as well as the pace of stripping activity in recent months. However, to the extent there are any bearish steepening trades left to unwind, tomorrow's auction could be a liquidity event for investors to unwind these positions. Still, on balance, with valuations rich we think this supply requires above-average end-user demand to absorb smoothly, particularly because market depth has deteriorated as of late, falling to its weakest levels since early spring."