J.P.Morgan Expect 20-Year Supply To Go Smoothly

Ahead of Wednesday’s 20-Year Tsy auction J.P.Morgan note that “after traversing a 50bp range, 20-Year yields are only 1bp lower vs. their March auction levels. The sector has outperformed along the curve over the past month with the 10s/20s/30s butterfly narrowing 5bp, but this move seems justified with the butterfly looking fairly valued relative to the wings after adjusting for the level of 20-Year yields, the slope of the 10s/30s curve, and the level of HG spreads as a proxy for risk appetite. Meanwhile liquidity conditions have improved, with market depth in the sector recovering to its highest level since December. Overall, with 20-Year yields roughly 23bp above their local lows reached two weeks ago, and liquidity improving, we expect tomorrow’s auction will likely be digested smoothly.”