J.P.Morgan Believe More Concession Is Needed For 30-Year Auction

J.P.Morgan note that Tuesday will see “Treasury auction $18bn reopened 30-Year bonds, $1bn smaller than the last reopening auction in July.”

• “The long end of the curve appears too steep relative to its drivers, which should be supportive for tomorrow’s auction. However, we note that tomorrow’s CPI report could influence the outcome of the auction.”
• “Monday’s weak auction results were likely impacted by weak risk appetite ahead of CPI and highlight that investors remain on the sidelines despite the recent move to higher yields, amid elevated macro uncertainty.”
• “We do not find that 30-Year auctions that take place on the same day as the release of the CPI necessarily see tails, but we note that 30-Year auction tails have been positively correlated with upside inflation surprises.”
• “Thus, our view that CPI was unchanged in August, slightly above consensus expectations, suggests that tomorrow’s auction should require some additional concession in order to be digested smoothly.”