MBS LUNCH: 7 Year Treasury Note Auction Results

YIELDS
    High                           2.835 pct
    Median                       2.750 pct
    Low                            2.650 pct

PRICE/ACCEPTANCES
    Price                          99.463748
    Accepted at high        87.98 pct
    Bid-to-cover ratio       2.76

AMOUNTS TENDERED AND ACCEPTED (dollars)
    Total accepted                              32,000,045,800
    Total public bids tendered            88,265,357,800
    Competitive bids accepted           31,976,388,000
    Noncompetitive bids accepted     23,657,800
    Fed add-ons                                960,931,500
  

    Primary Dealer Tendered             57,753,000,000
    Primary Dealer Accepted              8,922,950,000
    Primary Dealer Hit Rate               15.45%
    Primary Award  Overall Award     27.88%

 
    Direct Bidder Tendered               4,730,000,000
    Direct Bidder Accepted                3,073,000,000
    Direct Bidder Hit Rate                  64.97%
    Direct Bidder Overall Award         9.60%

    Indirect Bidder Tendered            25,758,700,000
    Indirect Bidder Accepted             19,980,438,000
    Indirect Bidder Hit Rate               77.57%
    Indirect Bidder Overall Award      62.44%

The initial reaction to the auction results has been positive, 10 yr TSY yields fell and "rate sheet influential" MBS prices are higher.

High yield stopped THROUGH WI.  In English, the yield decided on at auction was actually lower than where the 7yr was trading below the auction. 

We wouldn't be doing our job if we didn't say that these time frames are historically extremely volatile, but the extent to which yields stopped through is supportive for the rest of the day, week, and month...

And given the limited data situation the rest of the holiday week, we're generally feeling better than worse about MBS 's prospects at the moment.  That's not to say that profit taking isn't a reality and that no reasons for retracement will emerge.  But for now, smooth sailing until further notice.  Expect reprices for the better as MBS push into all time highs...