Auction History: US to sell USD 44bln of 7-year notes at 18:00GMT/13:00EST

US 7-YEAR NOTE AUCTION RECENT HISTORY:

• High Yield: (prev. 4.018%, six-auction avg. 3.900%)
• Tail: (prev. 0.4bps, six-auction avg. 0.4bps)
• Bid-to-Cover: (prev. 2.45x, six-auction avg. 2.46x)
• Dealers: (prev. 10.9%, six-auction avg. 11.4%)
• Directs: (prev. 22.2%, six-auction avg. 26.0%)
• Indirects: (prev. 66.9%, six-auction avg. 62.6%)

PRIMER

Price: The 7-year yield has fallen in recent weeks and currently trades around 3.79% at pixel time, vs January's supply high yield of 4.018% on January 29th and off the YTD peak of 4.093% (January 20th). Yields have been pressured ahead of the auction in a flight to quality bid amid geopolitical tensions, trade reports and downside in Nvidia (NVDA) shares. 

Macro Landscape: US data has shown a stabilisation in the jobs market with a very strong January report, but participants are highly fixated on next week's NFP to see if this strength holds, or is faded. However, inflation data has been mixed, with a hot December PCE but a soft-leaning January CPI. Trade uncertainty has risen too, after the Supreme Court deemed Trump's IEEPA tariffs illegal - albeit, Trump has responded with a flat 15% global tariff rate under Section 122. There has been little US economic data this week, but the 7-year auction takes place after the weekly claims data, which saw initial claims rise, albeit beneath expectations, while continued claims fell below forecast - continuing to show evidence of a low hire low fire jobs market. Meanwhile

Auction Commentary: The average tail of the last six seven-year auctions is 0.4bps, ranging between a stop through of 0.3bps and a tail of 0.8bps. The seven-year auction is on the back of two relatively soft 2 and 5-year auctions this week, while BMO Capital highlights that there’s a historical tendency (67% since 2023) for the succeeding 7-year auction to follow suit when the 2- and 5-year posts tails. The desk notes that 7s do not look particularly compelling in outright terms.