JPM Believe That 7-Year Supply Will Require Above-Avg. End-User Demand

J.P.Morgan note that Thursday will see Treasury auction "$62bn 7-year notes, $3bn larger in size than last month. 7-year yields rose as much as 17bp in the weeks following the December auction, and though a lot of the move was retraced, yields are still 5bp higher than a month ago. 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 +1.5bp, in line with our fair value estimate, and is now trading at +1.375bp. Overall, despite the higher yield levels, we think tomorrow's upsized auction will require above-average end-user demand to be digested smoothly."