After two disappointing auctions earlier this week when both the 2Y and 5Y sales tailed to subpar investor demand, moments ago we got the last coupon auction of the week when the Treasury sold $62BN in 7Y paper. And while there were some fears that the auction would suffer even worse demand, if nowhere near as bad as the catastrophic 7Y auction in late February which sparked weeks of market turmoil, the demand for today's offering was actually stellar.
The auction priced at a high yield of 1.264%, stopping through the When Issued 1.267% by 0.3bps and lower compared to last month's 7Y auction yield of 1.285%. In fact it was the lowest 7Y yield since February's 1.195%.
While the bid to cover drifted modestly from last month's 2.412 in May to 2.361 now, this nonetheless was well above the six-auction average of 2.27 (this is because the lookback period includes the catastrophic, failed 7Y auction in February when the BTC was a dismal 2.045).
The internals were also solid with Indirects taking down 60% well above the 56.1% average, and with Directs rising to 21.34% or the highest since February, Dealers were left holding just 18.7% of the takedown, the lowest since August 2020.
Overall, a stellar auction and quite a reversal from the trend of the last two auctions which came in decidedly weak.