Strong 7Y Auction Despite Decrease in Foreign Buyers

Overview of the 7Y Auction

Following two coupon auctions that stopped on the screws, a robust 7Y auction was recently held, marking the strongest auction of the week. The Treasury sold $44 billion in 7Y paper in a solid auction, pricing at a high yield of 3.668%, down from 3.770% last month. The auction stopped through the When Issued 3.67% by 0.7bps, reversing the 0.9bps tail last month.

Details of the Bid

The bid to cover was 2.628, a rise from 2.50 in August, and above the six auction average of 2.54. This places it almost exactly in the middle of the very narrow range centered around 2.50 over the past decade.

Internal Analysis

The internals were average, with Indirects taking down 70.8%, the lowest since June but just above the six-auction average of 70.1%. Meanwhile, the Directs take down increased to 20.3%, from 11.2%, leaving Dealers with just 8.9%, a drop from 13.7% last month, and one of the lowest on record.

Final Thoughts

In summary, this was a solid, if not exceptional, 7Y auction. It clearly benefited from the concession in today's modest selloff which pushed yields near session highs ahead of the auction deadline.

Bottom Line

While the 7Y auction wasn't spectacular, it was still a solid performance. It's interesting to note how the auction took advantage of the day's modest selloff, pushing yields near session highs. What are your thoughts on this? Do you think this trend will continue in future auctions? Share your thoughts and this article with your friends.

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