Results were very strong for the Treasury’s monthly 7-year note auction where the large $32 billion size failed to water down coverage which came in at 2.98 for the highest rate since the coupon’s February 2009 launch. In another sign of strength, the auction stopped out at 3.078 percent, about 1/2 basis point below the 1:00 bid. Dealers ended up buying a lot of the issue, taking down 45 percent. Indirect bidding was light, at a 40 percent takedown, and is only partially offset by a record direct takedown of 17 percent. The high direct takedowns in recent auctions, including this one, are likely to increase talk that buyside accounts are bypassing dealers. Treasuries showed little reaction to the results which cap another weak of heavy, and successful, Treasury borrowing.
The bid/cover ratio curve seems to be indicating very high demand led by Primary dealer network. Indirect Bidders were lower as a class of bidders compared to last auction at 40%.
The offerred amount continues to be at record levels.