J.P.Morgan Suggest 20-Year Supply Will Need Above Average End User Demand

J.P.Morgan note that Wednesday will see “Treasury auction $14bn reopened 20-Year bonds, $2bn smaller than the last reopening in April, and the smallest 20-Year auction size since Treasury reintroduced the bond in 2020. Yields have risen more than 30bp since the May auction and remain near their highest levels of the expansion. Turning to relative value, the 20-Year sector appears fairly valued along the curve. On margin, with yields near their highest levels since late-2013, this should help attract demand for tomorrow’s auction, but we know the 20-Year sector tends to suffer when volatility picks up and liquidity deteriorates, and we think it will take above-average end-user demand to digest this supply smoothly.”