J.P.Morgan Look For Smooth Digestion Of 10-Year Supply

J.P.Morgan note that Tuesday will see the Treasury auction "$39bn 10-Year notes, $2bn smaller than the new last new-issue auction in August. 10-Year yields have declined 9bp since the October reopening, and appear approximately 25bp too low relative to their fundamental drivers. Turning to relative value, the 10-Year sector appears fairly valued along the curve after adjusting for the level of yields and the shape of the curve. The 10-Year roll opened at 1.4bp, slightly inside our estimates, and is now trading 1.5bp. Though valuations remain rich, given the recent strength in end-user demand at long-duration auctions, we think tomorrow's auction will be digested smoothly."