After two ugly auction to start the week, with both the 2Y and 5Y sales tailing badly, today’s 7Y was even worse.
Stopping at 3.034%, the auction tailed by a whopping 0.9bps to the 3.025% When Issued, and also was the first 3%+ 7 Year auction since March 2010.
The internals were also very ugly, with the Bid to Cover sliding from 2.65 to 2.45, below the 2.53 six auction average, and the lowest since March 2018. The takedown was lukewarm, with Direct interest sliding, and taking down just 12.8%, down from 19.0% last month, while Indirects saw a modest lift from 59.5% in August to 62.0% currently right on top of the 6 month average; dealers were left with 25.3%.
Yet despite the auction’s poor performance, the bond market appears to have looked past through and there was no negative reaction in the secondary market as yet another chunk of US debt was easily digested by the market.