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J.P.Morgan Think 20s Require Further Concession For Auction To Go Smoothly

US TSYS

Ahead of Tuesday’s 20-Year Tsy auction J.P.Morgan note that “20-Year yields have declined roughly 25bp since the February auction and are trading near their lowest levels since the beginning of February, but the sector has underperformed along the curve with the 10s/20s/30s butterfly widening 9bp since the last auction to its cheapest levels this year. Despite the recent cheapening, the sector appears rich relative to the wings after adjusting for the level of 20-Year yields, the slope of the 10s/30s curve, and the level of HG spreads as a proxy for risk appetite. Given the richness of the sector and the fact that risk sentiment should stay low ahead of Wednesday’s Fed meeting as well as uncertainty high amid ongoing bank liquidity concerns, we believe that tomorrow’s auction will likely need further concession to be digested smoothly.”

MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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