Belly-Buster: Primary Dealers Come To Rescue Of Tailing 7 Year Auction

Tyler Durden's picture

Perhaps the reason why the just concluded 7 Year auction priced quite sloppy, if not outright ugly, is because it came at a time when virtually nobody was paying attention, or otherwise bidding. Moments ago the Treasury sold $29 billion in 7 Year paper, which priced at 2.152, a notable 1.2 bps tail to the 2.140% When Issued, indicating not all was well with the internals. Sure enough, the Bid to Cover of 2.435 was well below the TTM average of 2.56, and was the lowest since November. Direct Bidders were not too excited with the paper, and as a result took down only 16.66% of the final allottment, the lowest also since November. And with Indirect taking down a tame 40.62%, this mean Dealers were forced to step up and buy 42.72% of the issue - the highest Dealer allocation since, you guessed it, November. Perhaps the only thing the auction had going is that at 2.15%, the closing yield remains decidedly low (having peaked recently at 2.32 in April), if rising modestly from the 2.01% in May which happened to be the lowest since October.

Overall, a sloppy, unexciting auction, and the result was some modest weakness across the curve.

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The Most Interesting Frog in the World's picture

So the Primary Dealers had the government's ass over a barrel, but let 'em off the hook.  Rates are NEVER going higher...

SheepDog-One's picture

Why bite the hand that provides their endless free buffet? Just flip it back to them at a profit next week.

Kaiser Sousa's picture

keep counterfeiting...

while i keep stackin...


SheepDog-One's picture

Everyone too busy panic buying stawks.

alien-IQ's picture

is that why the /ES just went full vertical? or did some other bullish news break, like WW3?

madbraz's picture

but but but I thought NY FED reverse repo operations ($137 billion today) where just an "exercise in preparedness", according to Dudley...


they don't give a rats a$$ if their schemes are obvious, in broad daylight, with no underlying justification and with the conivence of the NY FED - who's looking anyway

yogibear's picture

Yes, William Dudley is pulling the levers.

madbraz's picture

Yep, no one wants treasuries - that's why the NT FED just gave $137 billion of them in reverse repo to banks to go ahead and short treasuries...