J.P.Morgan Look For Pre-Auction Concession In 7s

J.P.Morgan note that Thursday will see the Treasury auction $62bn 7-Year notes, "unchanged in size from last month. 7-Year yields have declined by more than 25bp since the last auction, and remain significantly lower than model-implied yields from our fair-value framework. However, the 7-Year sector seems to be fairly priced along the curve after adjusting for the level of rates and the shape of the curve. The WI 7-Year roll opened at +2.125bp, about 0.5bp wider than our projection, and is now trading at +1.625, outperforming the carry over the period. While Treasury auctions have been absorbed easily, we think the low level of yields warrants a larger concession."