2017 Economic Calendar
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7-Yr Note Auction  
Released On 10/26/2017 1:00:00 PM For 10/26/2017 1:00:00 PM
Auction Results
Total Amount$28 B 
Coupon Rate2.250% 
Bid/Cover2.39 
Yield Awarded2.280% 

Highlights
Results are soft for the monthly 7-year note auction, where coverage, at 2.39, was the lowest of the year, and the bidding on the sloppy side, pulling down the high yield to the awarded 2.280 percent, about 0.3 basis points above the 1:00 bid. End investor demand was lukewarm at best, with non-dealers taking down 77 percent of the $28 billion offering, their smallest share since June. Reflecting the general uptrend in Treasury yields in October as the Fed commenced the unwinding of its balance sheet and in anticipation of another hike in the Fed funds rate in December, the 2.280 percent high yield was 15 basis points above last month's rate. But it is still 5.5 basis points short of the January auction high yield for the 7-year, where the 2.335 percent yield was the highest since December 2013.

Definition
Treasury notes are sold at regularly scheduled public auctions. The competitive bids at these auctions determine the interest rate paid on each Treasury note issue. A group of securities dealers, known as primary dealers, are authorized and obligated to submit competitive tenders at Treasury auctions. Dealers can hold the bills, resell the bills to their clients or trade them with other securities firms. Typically, the New York Fed approves about 20 securities firms to be primary dealers but that number dropped sharply during the 2008 financial crisis as some were merged into other firms or went bankrupt. The Fed has been rebuilding that number regularly and the latest list can be found here. The Treasury announces the amount, date and time of the 7-year note auction monthly. The 7-year notes are announced around the third week of the month (usually on Thursday) and then auctioned the following week. In all cases, the 7-year notes are issued (settled) on the last day of the month, unless it falls on a weekend or holiday, and then they are issued on the next business day. (Department of the Treasury)  Why Investors Care
 
[Chart]

Data Source: Haver Analytics
 
[Chart]
During periods of stability in monetary policy, it is not uncommon to see average yields on 7-year notes to run at least 200 basis points over the fed funds rate target. But the differential has swung in some years on changes and expectations of changes in Fed policy. In 2007 and early 2008, the 7-year note rate was below the fed funds target on tight monetary policy. In latter 2008 and through 2011, extremely loose monetary policy pushed the differential back up. This chart shows the average monthly 7-year note yield, not the latest auction results.
Data Source: Haver Analytics
 

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