Stellar 7Y Auction Sees Blowout Foreign Demand As Yields Tumble

If there was any concern that today's post-JOLTS yield plunge would lead to reduced demand for today's closely watched belly-of-the-curve auction, they evaporated moments ago when demand for 7Y paper was almost off the charts.

Pricing at a high yield of 4.212%, today's sale of $36BN in 7Y notes priced at the highest yield on record, and about 13bps above the July auction which stopped at 4.087%. And despite concerns that a lack of concession could lead to lower demand, the auction stopped through the 4.232% When Issued by 2bps, the widest stop through since January, with just one tail in the past 4 auctions.

The bid to cover was a solid 2.66, the highest since Jan 2023 and another indication of the solid demand for today's sale.

But the clearest signal that buyers just couldn't get enough came from the Indirect bidders who took down 75.25%, well above the six-auction average of 68.4% and one of the highest foreign awards on record. And with Directs taking down 15.0%, the lowest since Oct 2020, Dealers were left holding on to 9.8%, also well below the recent average of 12.8%.

Overall, this was a stellar belly-buster of an auction, and one which helped send 10Y yields down to new session lows at 4.11% from 4.24% earlier.