U.S. Treasury to auction off $62 billion a 7 year notes at the top of the hour

The 7-year WI is currently trading at 1.288%

The U.S. Treasury will auction of $62 billion a 7 year notes at the top of the hour. The current yield on the When-Issued (WI) preauction is at 1.288%. Traders will judge the high yield vs the WI yield at the time of the auction as a means to help determine the demand for the auction. 

Some key six month average is of the major components of the auction shows:

  • Bid to cover, 2.26x. The bid to cover is the number of bids for the auction amount. A higher number vs the average, is indicative of stronger demand. 
  • Dealers 24.8%. If the number is smaller, the US government dealers are saddled with less than normal (also indicative of strong demand)
  • Indirects 57.0%. The indirects are an indication of foreign demand. The majority of US debt auction to go overseas to nondomestic investors
  • Directs 18.2%. This bucket includes pension funds, US hedge funds and domestic purchasers

The last auction high yield came in at 1.306%. The tail was -0.1 bp vs the WI level.

The 5 year auction yesterday was given a grade of A- indicative of strong demand.  The tail was -0.8 bps, the indirects were higher than average, the dealer % was less than average and the Bid to cover was higher than average. All are indicative of better-than-average demand.  

Overall today US yields are higher with the five year up 4.2 basis point, the 10 year up 4.6 basis points and the 30 year up 4.8 basis points


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