J.P.Morgan Expect 30-Year Supply To Be Digested With Relative Ease

J.P.Morgan note that Thursday will see the Treasury auction "$27bn new-issue 30-year bonds, unchanged in size from the last new-issue auction in November. Since the last auction, 30-year yields have risen 10bp and are near their highest levels since the onset of the pandemic. The 10s/30s curve is 6bp steeper over the same period and appears fairly valued after adjusting for fundamental drivers. The WI roll opened near -0.25bp and is currently trading at -0.375bp. Given the rally in equities and rise in long-term yields over the interim period, our nowcaster indicates the funded status of the largest 100 defined-benefit pensions has moved back above 90% for the first time since mid-2019, suggesting these funds have likely resumed their asset allocation into fixed income. Overall, given the recent backup in yields and expected continued robust LDI demand for the long end, we think tomorrow's supply will be digested with relative ease."