The 7 yr note auction was good as the yield at 3.078% was about 1-2 bps below the when issued and the bid to cover at 2.98 is the highest since this maturity was reintroduced in Feb ’09. The average since then is 2.59. The fly continues to be the very high level of direct bidders which totaled 17.2% with indirect bidders chipping in 40.3% of the auction. 17.2% is so far above normal (has only been in double digits once before and was running 2-8% most of last year) that it is really distorting the color on who is buying as buyers avoid the dealer community in placing bids and go direct to the Treasury instead. This influence is possibly skewing the pricing as dealers don’t have as much transparency of the market.
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