After a subpar and tailing 2Y auction and a mediocre and tailing 5Y auction both of which took place on Monday in the holiday-shortened week, moments ago we got the week's final coupon issuance in the form of $35BN in 7Y paper. It was ugly. In fact, it was almost as ugly as that infamous Feb 2021 7Y auction which sparked a brief selling panic across the Treasury market.

The high yield of 3.890% was below last month's 4.027%, the first sequential decline in auction yields since July, but more notably it tailed then 3.863% When Issued by 2.7bps. This was the biggest 7Y tail since that infamous Feb 2021 seven year auction which sparked a flash crash across the curve and a mini freak out in the rate market.

The ugliness continued below the surface with the bid to cover sliding to 2.330, below last month's 2.430 and the lowest since Dec 2021. Obviously it was below the six-auction average of 2.57.

The internals were especially ugly, with the Indirect award sliding to 61.9% from 63.2%, and the lowest since March. And with Directs taking down 16.75%, Dealers were left with 21.35%, the highest award since July 2021, when QE was still merrily chugging along and when Dealers would quickly flip their holdings back to the Fed.

In short, this was a horrific 7Y auction, and only the fact that prices rallied sharply into the auction deadline prevented what would have been a painful rout on any other day.

(Click on image to enlarge)

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