Treasury Seven-Year Sale Caps $258 Billion Week of Higher Yields (Git-R-Done!)

By Anthony B. Sanders


Both Larry the Cable Guy and Treasury Secretary Steve Mnuchin would be proud of this week’s Treasury auctions. The “Git-R-Done! Auctions

(Bloomberg) — The U.S. Treasury’s $29 billion auction of seven-year notes drew the highest yield for securities at that tenor since 2011, capping a $258 billion flood of debt sales over three days.

As with the week’s other note offerings, there was a dip in the amount of bids relative to the amount sold, signaling weaker demand. With the Treasury ramping up borrowing as part of its plan to finance widening budget deficits, the auction was $1 billion larger than it was last month and the bid-to-cover ratio slid to 2.49 from 2.73 at the prior sale. 

Indirect bidders, a class of investors that includes pensions and mutual funds, purchased 62.2 percent, down from 78.1 percent last month. Direct bidders, on the the other hand, bought 15.6 percent, the largest share since September. The securities were priced to yield 2.839 percent, around 0.7 basis point above the level they were trading at before the auction in the when-issued market. The yield was the highest since at auction since March 2011.

All told, the auctions show that there’s demand out there for Treasuries, even as supply ramps up, but investors may require higher yields to step in and buy.

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