The U.S. Treasury auctioned off $47 billion of 7 year notes:

  • High yield of 2.499%
  • WI level at the time of the auction 2.486%
  • Tail +1.3 bps vs 6 month average of 0.3 bps
  • Bid to cover 2.44X vs six month average of 2.31X
  • Directs 28.6% vs six month average of 21.7%
  • Indirects 60.9% vs six month average of 61.5%
  • Dealers 10.5% vs average of 16.8%

Grade: B-/C+

The auction had some mixed results.

The good:

  • Bid to cover higher than the six month average
  • Strong domestic demand as direct bidders came in at 28.6% all above the 6 month average (rotation out of stocks into bonds perhaps)
  • Dealer not saddled with excess supply

The bad:

  • The auction still needed a 1.3 bp tail vs six month average of 0.3 basis points to distribute the issue
  • international demand (indirects) was slightly less than the six month average