The U.S. Treasury just held an auction for its key 7-year notes on Wednesday and demand was deemed to be short of what bond investors wanted to see. Today’s auction was not a deathblow to bond investors, but it also failed to bring any great interest rate argument that would signal that investors have no worries about rising rates in the future.

Today’s coupon was 1.25%, with a yield of 1.26% and with 73.75% of bids at the high. Another measurement is the bid-to-cover and that was a tad light at 2.65. The 7-year Treasury auction is not a true barometer for long-term rates like you would expect from the 10-Year note or particularly from the 30-Year Long Bond. As far as why that is the case, it is quite simply because the traditional banks have a cap out in the five-year to seven-year range for matching off liabilities and assets.

The indirect bids took up 33.4% and the direct bid took up 18.2% of the auction. CNBC’s Rick Santelli gave a grade of C+ for this Treasury auction.

As far as how 1.26% compares for a yield, the 5-year yield is about 0.77% and teh 10-year yield is about 1.877%.

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