Strong 7Y Auction Sees Impressive Foreign Demand Despite Slight Tail

After two Treasury auctions this week, including a stellar 2Y and a poor 5Y, moments ago the Treasury concluded the week’s coupon issuance ahead of tomorrow’s Jackson Hole video conference, when it sold $62 billion in 7-Year bonds in what was another mediocre auction.

The high yield stopped at 1.155%, about 10bps higher than the July if the second lowest since March, and a tail of 0.4bps to the When Issued 1.155%.

The bid to cover of 2.336 also came in stronger than July’s 2.231 if in line with recent auctions except of course for the catastrophic February 7Y auction which sparked a spectacular move in the bond market.

The internals were solid with Indirects taking down 61.1%, the highest since January and well above July’s 58.4%. And with Directs taking down 18.9%, Dealers were left with 20.1% of the auction, both in line with recent results.

Overall, a solid auction despite the modest tail, and certainly an improvement to yesterday’s rather dismal 5Y auction which pushed yields to session highs. Indeed, the 10Y has dipped from 1.36% just ahead of the auction to sub-1.35%.

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