Treasuries moved lower after the US Treasury 7-Year Bond Sale garnered a D- rating across the fixed Interest desk with weak demand from the international market. Indirects took down 61.9% compared to 77.9% previously. The tail was -2.1 basis points with WI level at time of the auction 2.801% and the high yield of 3.259% at the auction. This was another long tail, yesterday’s 10-year sale tailed by 3 bps, which was the most since 2010. Equity markets continued to sell off after the sale.
Today’s $40 bln 7-yr note -2.1 basis point is indicative of weak demand. The average is -0.5 basis points for this issue. The desk gave a D- 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: $40 billion
- High yield: 3.280% (When-Issued: 3.259%)
- Bid-to-cover: 2.48
- Indirect bid: 61.9%
- Direct bid: 20.4%
- Tail -2.1 basis points
Auction grade: D-
Yields after the auction
- 2-yr: +1 bp to 3.13%
- 3-yr: UNCH at 3.21%
- 5-yr: -1 bp to 3.25%
- 10-yr: UNCH at 3.19%
- 30-yr: -1 bp to 3.30%
Prior auction results:
- High yield: 2.777%
- Bid-to-cover: 2.69
- Indirect bid: 77.9%
- Direct bid: 15.76%
Average results of previous 12 auctions:
- High yield: 1.766%
- Bid-to-cover: 2.36
- Indirect bid: 62.7%
- Direct bid: 21.2%
Live From the Pit
From The TradersCommunity US News Desk