Following two poor auctions, with both the 2 and 5 Year issue earlier this week pricing in wobbly conditions, many had expected today’s 7 Year, and last for the week, sale of $28 billion in Treasurys to tail as well. Instead, as we learned moments ago demand for the belly of the curve was the strongest among this week’s auctions, perhaps as a result of today’s sharp selloff in global rates.
The auction printed at 1.653%, on the screws with the When Issued, if well above last month’s 1.385%. Today’s auction was also the highest yielding since January of this year when the yield was 1.759%. Perhaps it was the bounce in the yield that prompted foreign buyers to return, with Indirect Bidders taking down 61.5%, the highest since July if just below the 6 month average. Direct Bidders were also prominent, taking down 13.2%, above the 6mma of 11.5%. As a result, dealers were left with 25.3% of the auction, the lowest allotment since June.
In summary, a largely average auction, however certainly stronger than this week’s two previous issues and one which could have gone far worse as a result of today’s steepening in the long end.
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