Tuesday's weak 2 Year bond auction is now a distant memory, and following yesterday's strong 5 Year it was not surprising to see a very strong pick up in demand for the just concluded 7 Year auction [5]. On the surface, the auction was very strong with the high yield printing at 1.496%, stopping through the 1.515% When Issued, if still the highest yield since March 2012.
The internals were also very strong, with the Bid to Cover closing at 2.70, in line with last month's 2.71, and above the TTM average of 2.68. More importantly, Direct demands soared with 20.68% of the takedown going to Direct bidders, the second highest ever in this series, and lower only to December's 23.11%. Indirects were no slouch either, with a final allotment of 40.84%, leaving just 38.48% for Dealers, the lowest take down for 2013.
So with very strong primary market demand along the belly, it is safe to say all rumors of a blow up in the US bond market are greatly exaggerated, and at least for now, any fears of a great "vortexing" can be put to rest. Remember: TSYs still continue to be the primary source of repoable collateral and for the time being at least, everyone still wants them.
[6]