J.P.Morgan Expect 20-Year Supply To Be Digested With Relative Ease

J.P.Morgan note that Wednesday will see the Treasury "auction $24bn reopened 20-Year bonds, unchanged in size from the last reopening auction in September. In relative value terms, the 20-Year sector has appeared cheap along the curve for most of the summer, but has outperformed over the last couple of months, and now looks expensive after adjusting for the level of yields and the slope of the curve. Liquidity conditions in the sector have improved since earlier in the year: 20-Year market depth has risen materially, and is almost in line with 30-Year depth. Perhaps more importantly, similarly to September, last week's long end auctions saw historically strong end-user demand and we think investment managers, driven by relentless inflows, will continue to be a driver of strong demand in tomorrow's auction. On top of that, 20-Year yields have risen approximately 29bp since the last auction in September, so we think tomorrow's supply should be digested with relative ease."