Average 7Y Auction Stops On Screws As Foreign Demand Drops

A stellar 2Y auction, a subpart 5Y, and it only makes sense that we end the week with a perfectly average sale of $44BN in 7Y bonds.

The last coupon auction of the week priced at a high yield of 4.512%, up from last month's tailing 4.473%, and on the screws with today's When Issued 4.512%. Remarkably, this is the 3rd 7Y auction to price on the screws in 2026 alone, suggesting this tenor may be the most relevant one for market accuracy ahead of the actual auction. 

The bid to cover rose to 2.505, up from 2.486 last month and the highest since May; it was also above the recent average of 2.491.

Internals took a small step back: Indirects were awarded 60.8%, down from 70.2% in July and below the six-auction average of 65.1%. And with Directs taking 27.0%, up from 16.9% last month, Dealers were left with 12.3%, the lowest since May if above the recent average of 11.8%.

Overall, this was a snoozer of an auction and maybe that's for the best one week after the Bessent Buyback Bluff sparked market chaos and turmoil across the entire yield curve. In short: things are mostly back to normal, even if yields on the long-end remain just shy of multi-year highs.