J.P.Morgan Suggest 10-Year Supply May Require Concession

J.P.Morgan note that Wednesday will see the Treasury auction “$36bn 10-Year notes, $2bn smaller than the last reopening auction in October. 10-year Yields have increased 4bp since the November auction, but appear more than 2 standard deviations too low relative to their fundamental drivers. Turning to relative value, the 10-Year sector appears slightly rich along the curve after adjusting for the level of yields and the shape of the curve. With yields still near the low end of the range they have held since early fall, valuations historically rich relative to fair value, and liquidity already having fallen to year-end type levels, we think tomorrow’s auction could once again require a concession.”