Treasury has just finished auctioning $27billion 7 year notes...

This issue priced at 3.329% with 13.17% of the bids accepted at high yield (3.329%). Indirect bidders were once again a huge support taking a much higher than expected 67% of the issuance (72% of what they bid) while dealers were awarded 30% of the auction (17% of what they bid). Note: at the last 7 yr note auction the percent awarded at high yield was 78%. This indicates the possibility of good things to come for fixed income.

The demand for the auction was quite strong with the bid to cover coming in at 2.82 bids for every 1 awarded. This is the strongest bid to cover for a 7 yr proxy since the issuance was reopened in February.

All in all the Treasury successfully raised $85 billion new funds this week. "GREAT SUCCESS"

Following the auction the 10 yr note rallied  to 3.59 (yes that has technical significance..dont forget techs moderating!) resistance level is 3.57.

Holding under 3.62 is BULLISH FOR TSYs( for MBS too but in an empty kinda way...remember quarter end is coming and flows will be lighter in MBS world which could create some unexpected volatility)

...and the FN 5.0, although hesistant has made further gains....MBS/TSY yields spreads have however gapped out a few ticks as the rapid fall in benchmark yields outpaced the rally in MBS world.

Some reprices for the better have been reported...LOOK FOR MORE TO FOLLOW AS THE 10 YR RETESTS 3.62 WITH "GREAT SUCCESS"

2s vs. 10s: 247 bps