Foreign Buyers Return As Treasury Sells 7Y Paper At Highest Yield Since April 2010

After a poor 2Y and an average 5Y auction earlier this week, the Treasury concluded this week's issuance with a strong sale of $29BN in 7Y paper.

The auction priced at 2.952%, 23bps above the March stop of 2.72%, but stopping through the When Issued 2.958% by 0.6bps. Why the strong demand? Perhaps because this was the highest yield for 7Y paper since April 2010, when it yielded 2.82%.

The internals were solid too, with the Bid to Cover jumping to 2.560 from 2.34 in March, and above the 2.48 6 month average. Most important, however, was the return of Indirects bidders, i.e. foreign buyers, who took down 65.8% of thje auction, the highest since January and sharply higher than the 55.9% in March; and with the Direct award in line at 12.7%, just below the auction average of 13.0%, it meant Dealers would be holding on to 21.6% of the paper.

Overall, an impressively strong auction, which the bond market desperately needed at a time when there are growing questions whether the bond bull market has finally ended after nearly 4 decades.


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