J.P.Morgan Suggest 10-Year Supply Requires Further Concession

Ahead of Wednesday’s 10-Year Tsy auction J.P.Morgan note that “even after Tuesday’s selloff, intermediate Treasuries currently appear rich to our fair value model. 10-Year yields now appear about 20bp too low after adjusting for the market’s near-term Fed policy expectations, as well as medium-term growth and inflation expectations.”

• “Further, the 10-Year sector looks fairly valued on the wings after adjusting for rate levels and curve slope.”
• “With intermediate Treasuries looking rich to fair value and our Treasury Client Survey showing the most net longs in three months, we think demand is likely to remain muted. Thus we think tomorrow’s auction should require a further concession from current levels.”