While not nearly as impressive as this week’s preceding 2- and 5-Year auctions, both of which saw whopping central bank demand and record low Dealer awards, today’s 7 Year belly of the curve auction showed continued strong demand for US paper in what is rapidly becoming the most “liquid” market, that of primary issuance.
The high yield of 1.652% stopped through the When Issued 1.659% by 0.7 bps, the third consecutive “stopping through” auction in a row.
The bid to cover of 2.573 was modestly lower than last month’s 2.652, but was above the TTM average of 2.49.
The internals were also solid, with Indirects taking down a near record 64.61%, modestly lower than April’s 65.55% and about 5% below the record low from January, if well above the TTM average of 57%. Dealers were awarded 18.52%, the second lowest on record with just January lower, while Direct bidders ended up with 16.9% of the final award, the highest since August 2014.
The bond market reaction to the auction was positive, and continues to signal that curve flattening may continue apace if the Fed hikes ultra short end rates as demand for virtually every other maturity on the curve remains unabated.
via http://ift.tt/1XzZh6R Tyler Durden