J.P.Morgan Flag Need For Concession For 20-Year Supply

J.P.Morgan note that Wednesday will see Treasury “auction $16bn reopened 20-Year bonds, unchanged from the last re-opening auction in March. Yields have risen approximately 53bp since the March auction, the most on record in-between two 20-Year auctions, but the sector continues to look fairly valued along the curve. Though there has been a large outright concession, suggesting supply should be digested easily, realized volatility remains elevated, liquidity remains depressed, and the 20-Year sector no longer stands out as cheap. Thus, we think a further concession is required to digest tomorrow’s auction.”