J.P.Morgan Expect 30-Year Supply To Go Smoothly

Ahead of Thursday’s 30-Year Tsy auction J.P.Morgan note that “30-Year yields have decreased 23bp since the March auction, but we note that 10s/30s have steepened roughly 29bp during this period. We do not think that the result of Wednesday’s 10-Year auction should inform tomorrow’s 30-Year auction: over the past 5 years, the correlation between the tails of 10-Year and subsequent 30-Year auctions is close to zero. Turning to liquidity, we note that 30-Year market depth remains below early-March levels, which were already depressed by historical standards. Hence, end-users might use tomorrow’s auction as a liquidity event. Against this backdrop, we think tomorrow’s auction should be digested smoothly.”