A day before we hear from Bernanke and following an amazing Treasury rally since the Aug 10th FOMC statement, the 7 yr auction was good. The yield at 1.989% is below the when issued of 2.0% and the bid to cover of 2.98 is above the 1 yr average of 2.80 and matches the 2nd highest since the 7 yr was reintroduced in Feb ’09. My thoughts on tomorrow’s Bernanke’s speech are this: all he will do is elaborate on and clarify the FOMC statement of 2 1/2 weeks ago. There will be nothing new as Bernanke wants to see the economic response, if any, to the new leg lower in interest rates after QE1.5 was announced on Aug 10th.
