Treasury 7-year auction outlook: this completes the $88 B in coupon sales
Treasury 7-year auction outlook: this completes the $88 B in coupon sales this week. So far the auctions have been tepid, and average at best, and this one is likely to suffer the same fate, especially since SELL seems to be the operative word this morning after some strong data. The when issued (wi) yield climbed over 9.5 bps to 2.220% earlier this morning, in part on thinning liquidity. That's up 56 basis points from the award rate in October, and a stop there would be the highest since September 2014. Significant cheapening in the prior 2- and 5-year auctions didn't help generate solid demand, and the prospects of still higher rates down the road may keep potential buyers sidelined, especially in holiday thinned conditions that may be exacerbating price swings. The firmer dollar may be a put-off for foreign investors too, although the hefty yield premium to core European and Asian maturities could be enticing. Also, curve flattening trades and month-end demand could be supportive. The October auction stopped at 1.653% and saw a 2.49 cover (2.49 average) and a 61.5% indirect bid (60.7% average).