US treasury auctions off $44 billion or 7 year notes at a high yield of 4.194%

• High yield 4.194%
• Wi level at the time of the auction 4.216%
• Tail -2.2 basis points. The six month average -0.8 basis points
• Bid to cover 2.69X. The six month average 2.64X
• Direct 23.64% versus the six month average of 21.4%
• Indirects 71.52% vs the six month average of 67.6%.
• Dealers 4.85% vs six month average of 11.0%.

Auction Details and Evaluation

Grade Justification: A

• Why not A+? While all metrics are solid or better-than-average, the bid-to-cover was only modestly above average, not exceptional. A perfect score would typically require blowout figures across all categories.

• Strengths: The deep tail, strong indirect and direct participation, and low dealer retention all point to very strong end-user demand — the market wanted this issuance.

Summary

This was a very strong auction with broad participation and pricing well through the WI. The only reason for not assigning a perfect “A+” is that the bid-to-cover wasn’t exceptionally high — just slightly better than average. Still, an A grade reflects excellent overall execution.

This article was written by Greg Michalowski at www.forexlive.com.