Fannie 3.5s are now at their best levels of the day, after having been at their worst levels of the day just before the 7yr auction.  Part of the rally can be attributed to the strength of the auction itself, but considering that 7's don't tend to cause the biggest moves, the lion's share of this rally is better ascribed to the end of the week's entire auction cycle. 

In other words, there was impending supply that dealers would be forced to bid on until this auction.  Now there are no more compulsory bids to be made.  This helps balance buyers vs sellers and increases liquidity in general. 

Any negative reprice risk that had been waxing at 1pm has quickly waned.