Stronger International Demand at 7-year Treasury Bond Auction Completes Week’s Offerings

U.S. Treasuries completed this week’s note auctions and are hanging just below rebound highs in reaction to today’s $38 billion 7-yr note sale, which met much stronger demand than yesterday’s 5-yr note offering and the day before 2-yr note auction. Today’s sale drew a high yield of 4.908%, which stopped through the when-issued yield by 0.2 bps while the bid-to-cover ratio (2.70x) and indirect takedown (70.6%) were above average. Treasuries in the belly have led today’s intraday bounce and remain ahead. Equities sit just above lows breached in the past hour with the S&P 500 down 1.1%. The desk gave a B+ rating for the auction.

  • The domestic demand was at its 12-month average indicative of stronger domestic demand
  • International demand (indirect) was above the 12-month average.
  • Primary dealers were left with 11.60% v 12-month average of 13.2%
  • The desk gave a B+ rating on the auction.

Auction Highlights

  • Duration: 7 Years
  • Amount: $38 billion
  • High-yield 4.908% (When-Issued: 4.910%)
  • WI level at the time of the auction 4.910%
  • Stopped through the when-issued yield by 0.2 bps
  • Bid to cover 2.70X v 12-month average of 2.51X
  • Directs 18.4% v 12-month average of 18.4%
  • Indirect 70.6% v 12-month average of over 68.4%
  • Dealers 11.60% v 12-month average of 13.2%

Auction grade: B+

Yields after the auction.

  • 2-yr: -9 bps to 5.03%
  • 3-yr: -10 bps to 4.87%
  • 5-yr: -10 bps to 4.82%
  • 10-yr: -8 bps to 4.87%
  • 30-yr: -7 bps to 5.02%

Yields before the auction.

  • 2-yr: -4 bps to 5.08%
  • 3-yr: -4 bps to 4.93%
  • 5-yr: -6 bps to 4.86%
  • 10-yr: -3 bps to 4.93%
  • 30-yr: -2 bps to 5.08%

Prior auction results:

  • High yield: 4.673%
  • Bid-to-cover: 2.47
  • Indirect bid: 65.5%
  • Direct bid: 19.9%

Average results of previous 12 auctions:

  • High yield: 3.937%
  • Bid-to-cover: 2.51
  • Indirect bid: 68.4%
  • Direct bid: 18.4%

Bond auctions this week:

New supply this week.

  • Monday: 13- and 26-week bills
  • Tuesday:  42-day cash management bills, $51 bln 2-yr Treasury note auction results at 13:00 ET
  • Wednesday: 17-week bills; 2-year floating rate notes, $52 bln 5-yr Treasury note auction results at 13:00 ET
  • Thursday: 4- and 8-week bills; $38 bln 7-yr Treasury note auction results at 13:00 ET
Weak Demand in 5-Year Treasury Auction Amongst Continued Bond Selling
Steady Demand at 2 Year Treasury Notes Auctions Among Heavy Supply
Bond Traders Weekly Outlook: Global Bond Rout Gathered Pace

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