MBS LUNCH: 7 Year Treasury Note Auction Results

The Treasury has successfully auctioned $32 billion 7 year notes

YIELDS
    High        3.345 pct
    Median      3.290 pct
    Low         3.200 pct

PRICE/ACCEPTANCES
    Price              99.411474
    Accepted at high   55.69 pct
    Bid-to-cover ratio 2.72

AMOUNTS TENDERED AND ACCEPTED (dollars)
    Total accepted                       32,000,037,100
    Total public bids tendered       86,912,515,100
    Competitive bids accepted       31,947,974,000
    Noncompetitive bids accepted  52,063,100
    Fed add-ons                          948,398,600

    Primary Dealer Tendered         63,093,000,000
    Primary Dealer Accepted          15,563,767,500
    Primary Dealer Hit Rate           24.7% of what they bid on
    Primary Dealer Total Award      48.6% of total auction

    Direct Bidder Tendered           3,901,000,000
    Direct Bidder Accepted            2,113,784,500
    Direct Bidder Hit Rate             54.2% of what they bid on
    Direct Bidder Total Award        6.6% of total auction

    Indirect Bidder Tendered        19,866,452,000
    Indirect Bidder Accepted         14,270,422,000
    Direct Bidder Hit Rate             71.8% of what they bid on
    Direct Bidder Total Award        44.6% of total auction

Another auction done.  Another better than bad showing for duration.  The 2.72 bid to cover ratio is very close to the average of the last 4 auctions at 2.74.  The tail--the amount by which the yield exceeded the WI yield--was close to the same as the last auction at 3.5bps.  Indirect participation was well below the 4 cycle average of 62.5% at 44.6%.   The initial reaction in the bond market has been positive, and looks to be driving TSY yields back towards range bound morning levels seen  before a pre-auction concession. 

As always, we expect volatility post-auction.  After profit-taking weakened MBS this AM, it's too soon to tell if those losses will be recaptured.  The auction is strong ENOUGH that it could go either way, but the potential is certainly there for losses to be recaptured and for screens to be green by the time the lights go down in the city.