The U.S. Treasury will auction off $44 billion of seven-year notes at the top of the hour. The auction will conclude the coupon issuance for the week. The two and five year note options were middle-of-the-road. Yields are higher today after the higher inflation data in the US GDP, but off the highs for the day. Nevertheless, yields are at their highest levels for the year across the curve.
Below is a review of the major components from the last 7-year auction along with the six month averages of those components. The auction results will be compared to those components.
High Yield:
- Previous: 4.185%
- Six-auction average: 4.298%
Tail (the Tail is the difference between the WI level trading just prior to the auction and the auction high yield. A negative tail is indicative of a strong auction):
- Previous: -0.8 basis points
- Six-auction average: +0.65 basis points
Bid-to-Cover (the Bid to Cover is the number of bids from investors versus the supply of notes on sale. A higher number is indicative of stronger demand):
- Previous: 2.61X
- Six-auction average: 2.57X
Dealers (the Dealers provide Liquidity and are a backstop in the event of lower than anticipated domestic and international demand. A high % is indicative of low demand from the normal investors. :
- Previous: 12.9%
- Six-auction average: 15.1%
Directs (the Directs are a measure of domestic US demand. A higher number than the six month average is indicative of strong domestic demand):
- Previous: 17.4%
- Six-auction average: 17.1%
Indirects (the Indirects are a measure of international demand. In higher number than the six month average is indicative of strong foreign demand for the issue. The vast majority of US debt is sold to foreign investors):
- Previous: 69.7%
- Six-auction average: 67.8%
