Mediocre 7Y Auction Tails Most In 14 Months As Foreign Buyers Stay On Sidelines

Yesterday's 5-year Treasury auction saw strong demand, including increased foreign interest. In contrast, today's $44 billion sale of 7-year Treasury paper was only mediocre. The auction settled at a yield of 3.790%, a decrease from the previous month and the lowest since late September. It also "tailed" the when-issued yield by 0.8 basis points, marking the third consecutive tail and the largest since the previous August. The bid-to-cover ratio improved slightly to 2.457 but remained below the six-auction average. Indirect bidders received a larger allocation than in September but were still below the auction average. Direct bidders took a smaller share, leaving dealers with the largest allocation since April. This auction was considered forgettable and notably "tailed," which was somewhat unexpected given the upcoming Federal Reserve decision. The Fed is anticipated to cut rates and end quantitative tightening.