The 2 Year auction was strong, the 5 Year auction yesterday was mixed, but one word can best describe demand for today's issuance for "curve belly" 7 Year paper: blistering.
Moments ago, the 7 Year When Issued was trading at 2.028, expecting some serious concessions into the auction. Not only did these not materialize but the auction came in far better than expected, pricing in at 2.013%, a whopping 1.5 bps through the When Issued. The Bid to Cover was a strong 2.511, well above the 2.46 TTM average, with 56% of the auction going to indirects - above the 12 month average of 54.6%, 13.5% to Directs, which was also above average, leaving 30.5% for the Dealers.
Overall, the strong auction provided a lift for the longer end of the curve, which as a result of today's auction is set to flatten the 2s30s even more, thus making an even bigger mockery of the "Net Interest Margins are rising" thesis.

