What A Difference 3 Months Makes: Not A Trace Of Inflation Fears In Blockbuster 7Y Auction

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by Tyler Durden
Thursday, May 27, 2021 - 01:09 PM

What a difference three months makes: on this day in February, a catastrophic 7Y auction was this close to failing, and sparked a violent market selloff first in bonds, and then in stocks, leading to a flood of fears that the Fed had lost control over inflation. Fast forward to today, when moments ago we get the final of the week's coupon auction results when the Treasury sold $62BN in 7 year paper in what can be best described as a stellar auction.

The high yield of 1.285% was below last month's 1.306 and the lowest since February; it also stopped through the When Issued 1.291% by 0.6bps, the first stop through since January.

The bid-to-cover of 2.412 was impressive, rising from 2.314 last month, and not only well above the 6-auction average of 2.264 but also the highest since September.

The internals were also solid, with Indirects taking down 59.6%, the highest since January. And with Directs taking down 20.7%, or just above April's 20.6%, Dealers were left holding 19.7%, the lowest since January.

Overall, this was easily the strongest 7Y auction of 2021, and a far, far cry from the dismal February 7Y auction which sparked so much turmoil in the market.