US TSYS/SUPPLY: 7Y Auction Preview – On The Heels Of Strong 2Y And 5Y Auctions

Treasury sells $44bn of 7Y notes (91282CLZ2) at an earlier than usual 1130ET today. It follows Monday’s well-received 2Y and yesterday’s solid 5Y, with both supported by Bessent’s weekend pick as Treasury Sec and comments around targeting a US fiscal deficit of 3% GDP. However, outright yields offer a less compelling starting point for the second day running.

• 7Y yields are currently 5bps lower on the day, with 7s leading yield declines.
• The WI yield of 4.1875% is ~3bps below the Oct 29 high yield of 4.215%, in contrast to the ~5bp higher for yesterday’s 5Y and 15bp higher for Monday’s 2Y.
• Recent 7Y auction stats: the Oct auction stopped through by 2bps (largest since Aug and Jan 2023) which helped see a five-auction average stop through of 0.5bps.
• 7 of the past 10 auctions have stopped through, with tails in Aug (1bp), May (1.3bp) and Jan (0.2bp).
• The bid-to-cover of 2.74x in Oct was the highest since Mar 2020 vs a five-auction average of 2.62x.
• Primary dealer take was the lowest on record at 7.47% in Oct vs a five-auction average of 10.17%.
• Indirects took 71.96% in Oct vs a five-auction average of 72.38%.
• Directs took 20.57% in Oct vs a five-auction average of 17.45%.
• We watch to see whether yesterday’s strong direct and weaker indirect demand is replicated here.