An ugly 2Y auction (with the highest yield since 2008) on Tuesday, a mediocre 5Y auction yesterday, and now a blistering 7Y auction, in which the Treasury sold $28 billion in "curve belly" notes at a high yield of 2.13%, stopping through the When Issued by a surprisingly strong 1.1bps, the highest since April.

As Stone McCarthy described the auction in one word, "Tremendous", noting it a buyside takedown which was the second largest on record.

The internals were impressive: the bid to cover of 2.70 surged from last month's 2.46, was solidly above the 2.55 six-month average, and was the highest since April. It was also the third highest in the past 5 years. Indirect bidders couldn't get enough and were awarded 70.6% of the takedown, their highest allotment since April, and above the 69.3% 6MMA. Likewise, Directs waved it in, and took down 19.0%, the highest since December 2016, leaving Dealers holding only 10.4%, the second lowest award for the class on record, higher only than the 8.8% this past April. 

In short, a very strong auction, whether or not driven by China as SocGen speculated earlier, and one which not only pushed the curve lower but also sent the USDJPY to session lows, validating one of the strongest correlations we have observed in recent months.

(Click on image to enlarge)