After describing this week's prior two bond auctions as "blistering" and "scorching", we were concerned we would run out of hyperbolic adjectives to describe today's last for the week 7 year auction. As it turns out, our concerns were unfounded, because moments ago the Treasury announced it sold $29 billion in 7 Year paper at a 1.96% yield, a small 0.4 bps tail to the When Issued in an auction that was just modestly weaker than the prior two, relatively speaking, even if in absolute terms the high yield, down from 2.02% last month, was still the lowest since October 2013, and as can be seen on the chart below, is continuing to drop. The Bid to Cover also showed a substantial pick up in interest, jumping to 2.635, the highest since February, and well above the 2.54 TTM average.
Finally, the internals continued the impressive trend earlier this week, with Indirects allotted 50.03% of the proceeds, which also happens to be highest Indirect takedown in a 7 Year auction since the US downgrade in August of 2011 as the collateral shortage caused by crowding out of the private market by public players is forcing increasingly more bidders to frontrun central banks, and pension funds, into "high quality collateral."
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