J.P.Morgan Point To The Need For Some Concession Ahead Of 7-Year Supply

J.P.Morgan note that Thursday will see the Treasury auction $62bn 7-Year notes, "unchanged in size from last month. Since the last auction, 7-Year yields have declined by 8bp, with most of the move taking place over the past week, and are now trading near the low end of the range they have held for the last two months. From a relative value perspective, the 7-Year sector appears fairly valued versus the wings after adjusting for the level of rates and the shape of the curve. The WI 7-Year roll opened at +2.25bp, in line with our fair value estimate, and is now trading at +1.875bp, in line with the erosion of carry. Overall, given the recent decline in yields and fair valuations, we think tomorrow's auction will require some concession from current levels to be digested smoothly."