When we summarized yesterday's very strong 5 Year auction [7], we previewed today's 7 year issuance as follows: "assuming no material changes in the demeanor of the market over the next 24 hours, expect tomorrow's 7Y auction to also proceed without a hitch. In fact, the more the general sense of risk-off, the stronger tomorrow's auction will likely be."
That's precisely what happened.
Moments ago the Treasury announced it sold $29 billion in 7 Year notes, at a yield of 1.813%, 0.1bps through the When Issued, the lowest yield on the belly of the curve since March 2015, with a Bid to Cover of 2.516, 6 bps higher than the TTM average of 2.45. But while the headline data was solid it was the internals that showed a dramatic surge in foreign central bank interest for this most convex on the curve paper, when Indirect Bidders took down 62.6%. This was the highest indirect bid since December 2010, which left just 8.9% for Directs and a paltry 28.5% for Dealers, the lowest since March 2014.
[8]
And with that another successful week of bond issuance concludes, which has to thank if not so much China selling than certainly Janet Yellen for spooking stocks and inciting a Great Unrotation from equities in bonds yet again.
