Seven-Year Treasury Auction Misses the Mark

The $29 billion 1.125% coupon (1-1/8) went off at a discounted price of $99.1782 and this appears to be the lowest demand in six months for the 7-year note auction. Indirect bids were 35.5%, over 2 points shy of normal. The lowest yield for the pricing 1.248% with a bid to cover of what we calculated as 2.56. Investors are likely to focus on the more liquid and key 10-year Treasury Note based upon this auction. That yield is now 1.857%.

our take is that the strength in equities is more of the issue today. The Junk Bond Composite Spread measured by S&P was down to 509 basis points yesterday and stocks are hitting record highs. We hate to just ignore data but we are going to chalk a disappointing 7-Year T-Note auction simply to being interest elsewhere and due to the shortened work week with many A-Team Wall Streeters already being out for the week.