After two lousy, record-large coupon auctions in Monday's two-for-one special, moments ago the Treasury issued a non-record $42BN in 7 Year paper (we saw far bigger 7Y auctions which hit a mindblowing $62BN during the covid crisis), in what was a solid auction to close the month.

The high yield of 4.327% was above last month's 4.109% and on par with November's 4.399%. It also stopped through the 4.329% When Issued, a 0.2bps stop through which was the first since November, and followed three consecutive tails.

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The bid to cover at 2.577 was flat vs last month's 2.574 and right on top of the six-auction average of 2.56.

The internals were solid with Indirects awarded 69.6%, the highest since October and also above the recent average of 68.0%. And with Directs taking down 14.8%, modestly below the recent average of 17.6%, Dealers were left holding 15.60%, the highest since December and above the average of 14.4%.

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Overall, this was a solid auction, and a welcome reversal from the two subpar coupon sales yesterday which helpd push the 10Y as high as 4.3% yesterday. Not surprisingly, 10Y yields dropped to 4.28% after the auction, 2bps lower thanks to the strong auction results.

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