After one poor and one mediocre auction, today's sale of $28 billion in 7 year paper was a fiasco, stopping at 2.23%, a massive 1.7bps tail to the 2.213% When Issued, if below last month's 2.28% courtesy of the ongoing yield curve flattening which increasingly include the belly of the curve.
The internals were just as atrocious, with the bid-to-cover sliding to 2.36 from 2.391 last month, and far below the 6 auction average of 2.52.
Direct bidders were awarded 13.7%, in line with last month's 13.3%, and just below the 6 auction average of 14.5%, while dealers were left with 27.7% of the auction, far above the 6MMA of 19.3%, and the highest since September 2016. It also meant that Indirect bidders, i.e. foreign central banks and reserve managers, fled today's auction, taking down just 58.6%, the lowest since August 2016, and far below the six auction average of 66.2%.
What is most surprising is the poor auction in light of today's unmitigated buying frenzy across the curve.
In total: after yesterday's mediocre 5Y sale, today's 7Y auction was just shy of a disaster. We now wait until next week to find out if the revulsion to US duration will extend to benchmark, 10Y paper as well.