J.P.Morgan Look For Small Concession Into 3-Year Supply

J.P. Morgan note that Tuesday will see the Treasury "auction $52bn 3-year notes, $2bn larger in size than last month. The September auction cleared at 0.170%, 0.5bp cheap to pre-auction levels as end-user demand declined to 63.7%, the lowest share since April. The allotment details show reduced demand from both foreign investors as well as investment managers. Since the September auction, 3-year yields have increased by more than 1bp and are near their highest levels since late August. Front-end yields are likely to be well anchored by the Fed's shift to flexible average inflation targeting (FAIT) and its enhanced forward guidance, which means digesting tomorrow's auction should be of little concern. However, 4 of the last 5 auctions have tailed, and we look for a small concession tomorrow."