J.P.Morgan Expect Orderly 30-Year Supply

J.P.Morgan note that Thursday will see "Treasury's mid-month supply process conclude with the auction of $24bn reopened 30-year bonds, unchanged in size from the last reopening in January. Thirty-year yields have risen more than 30bp over the past month, but the 10s/30s curve has flattened 6bp over the period: the curve appears modestly flat after adjusting for its fundamental drivers. However, it stands out that with long-dated OIS forwards approaching the Fed's longer-run dot, the belly is the most vulnerable sector, and any further rise in yields should be led by the 5- to 10-year sector than the long end. Finally, liquidity conditions at the long end were not as severely impacted in the volatility in recent weeks as the intermediate sector, and market depth sits comfortably above averages observed over the last year. Overall, with long-end yields near pre-pandemic highs and long-dated forwards indicating the belly is more risk to a continued rise in yields, we think this should be an orderly auction process, but we would not be surprised to see a tail unless there is above-average end-user support."