Strong U.S. 7-year Treasury Bond Auction Gets A+ Rating on Higher International Demand

Treasuries have moved to their best levels of the day after the US Treasury 7-Year Bond Sale garnered a A+ rating across the fixed Interest desk with strong demand from the international market. The tail was -2.4 basis points with WI level at time of the auction 2.801% and the high yield of 2.777% at the auction. Equity markets have been recovering from last week’s plunge steadily.

Today’s $42 bln 7-yr note -2.4 basis point is indicative of strong demand. The average is -0.5 basis points for this issue. The desk gave a A+ rating on the auction.

  • The domestic demand was below its six-month average indicative of softer domestic demand
  • International demand (indirect) was also comfortably above the six-month average
  • Primary dealers were left with under 10% versus normal around 15.2%

Auction Highlights

  • Duration: 7 Years
  • Amount:  $42 billion
  • High yield 2.777% (prev 2.908)
  • WI level at the time of the auction 2.801%
  • Tail -2.4 basis points vs six-month average of 0.5 basis points
  • Bid to cover 2.69Xvs. six-month average of 2.37 times
  • Directs 15.76% vs. six-month average of 23.0%.
  • Indirects 77.9% vs. six-month average of 61.8%
  • Dealers 6.38% vs. six-month average of 15.2%

Auction grade: A+

Yields after the auction

  • 2-yr: -1 bp to 2.49%
  • 3-yr: UNCH at 2.63%
  • 5-yr: UNCH at 2.72%
  • 10-yr: +2 bps to 2.77%
  • 30-yr: +4 bps to 3.00%

Prior auction results:

  • High yield: 2.908%
  • Bid-to-cover: 2.41
  • Indirect bid: 65.0%
  • Direct bid: 19.8%

Average results of previous 12 auctions:

  • High yield: 1.641%
  • Bid-to-cover: 2.34
  • Indirect bid: 61.2%
  • Direct bid: 21.6%

Live From the Pit

From The TradersCommunity US News Desk

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