US treasury auctions off $38 billion a 7 year notes at a high yield of 4.908%

<ul><li>High yield: 4.908%</li><li>WI level at the time of the auction: 4.91%</li><li>Tail: -0.2 bps (previous: 0.3bps, six-auction average: -0.2bps)</li><li>Bid-to-Cover: 2.7x (previous: 2.47x, six-auction average: 2.73x)</li><li>Dealers (they take the leftovers from the domestic and international investors): 10.98% (previous: 14.6%, six-auction average: 12.0%)</li><li>Directs (a measure of domestic demand): 18.4% (previous: 19.9%, six-auction average: 17.6%)</li><li>Indirects (a measure of international demand): 70.62% (previous: 65.5%, six-auction average: 70.4%)</li></ul><p>AUCTION GRADE: Compared to yesterday, an A. </p><p>The market was nervous going into the auction especially given the weak demand yesterday. However, both domestic and international demand was stronger than the 6-month average (by a little). The bid to cover was near the 6-month average. Dealers were saddled with less than normal. </p><p>If the grade was not curverd given the recent auctions, the auction grade was more like a B-/C+, but relatively, it gets a sigh of relief and better grade.</p><p>Yields have moved a little lower with:</p><ul><li>5 year at 4.816% -10 basis points</li><li>10 year 4.872% -7.9 basis points</li><li>30 year 5.024% -6.8 basis points</li></ul><p>In the stock market (not sure I can trust), the declines have been paired a bit</p><ul><li>Dow is down -0.61%</li><li>S&amp;P -1.09%</li><li>NASDAQ index -1.76%</li></ul>

This article was written by Greg Michalowski at www.forexlive.com.