The US treasury auctioned off $36B of 7 year notes. Below are the details of the auction:

  • High yield 3.898
  • WI level at the time of the auction 3.903%
  • Tail -0.5 bps vs 6 month average of 0.0 basis points
  • Bid to cover 2.57X vs 6 month average of 2.55X
  • Directs (domestic demand) 24.7% vs 6 month average of 19.8%
  • Indirects (international demand) 62.5% vs 6 month average of 68.7%
  • Dealers (dealers take the rest) 12.9% vs. 6 month average of 11.5%

Mixed auction, but better than the 2 and 5 year auctions.

Positives:

  • A negative tail of -0.5 basis points which is better than the 0.0BP average over the last 6 months
  • The domestic direct demand was strong at 24.7%. US investors are being attracted by the higher yields

Negatives:

  • international demand was less than the 6 month average
  • the dealers took a little more than the six-month average

Neutral:

  • the bid to cover was near the six-month average