7 yr note auction, quick rundown

The 7 yr note auction finishes a blah week of auctions. The 2 yr was mixed, the 5 yr was soft and the 7 yr was mediocre. The yield of 4.716% was right in line with the when issued pricing but the bid to cover of 2.48 was below the one year average of 2.56. The combined direct and indirect bidders totaled 86% which is in line with the average over the last 12 months.

Bottom line, all of these auctions come in record sizes and while I do think it’s important to see how the supply is absorbed on the day of sale, the market impact is never really more than one day. Treasuries are more focused today on the GDP figure, the internals and the hotter than expected PCE deflator, along with still subdued initial jobless claims. I still expect a retest of 5% on the 10 yr yield this year.