The 7yr Treasury auction was much stronger than expected, with a bid-to-cover of 2.63 vs a recent average of 2.48.  The awarded yield was a whopping 2bps lower than the 1pm expectation (measured by trading levels in "when-issued" 7yr securities).  Indirect bidders (a proxy for foreign accounts) took a very big 69.4% versus a 57% average.

10yr yields were trading near 2.015 before the auction and quickly fell into the 1.99's afterward.  MBS also gained ground quickly and are now at the best levels of the day, up 3/32nds in Fannie 3.0s to 101-22.