J.P.Morgan Expect 3-Year Supply Will Be Digested Smoothly

J.P.Morgan note that Tuesday will see Treasury “auction $42bn 3-Year notes, $1bn smaller than last month and $16bn below the auction size from the fall of 2021. 3-Year yields have risen 6bp over the last month and are sitting in the middle of a 75bp range they have traded for the last 3 months. The sector appears slightly cheap along the curve after adjusting for the level of rates and the slope of the curve. The 3-Year roll opened at -0.75bp, in line with our estimates, and is trading at -0.125bp, underperforming the erosion of carry. With valuations looking somewhat cheap and yields higher over the last week, we think tomorrow’s auction should be digested relatively smoothly.”