When you add a watermark to a document in Microsoft Office Word 2007, part of the watermark text or the watermark picture is truncated.
For example, when you add the CONFIDENTIAL, Diagonal watermark to an envelope, the word "CONFIDENTIAL" is truncated.
This issue occurs because the watermark is bigger than the page size of the document. You cannot change the size of a watermark after you have added it to a document.
To work around this issue, use the Printed Watermark command to add a watermark to a document. To do this, follow these steps:
Open the Word 2007 document to which you want to add a watermark. Make sure that the document is set to the page size that you want.
On the Page Layout tab, click Watermark, and then click Printed Watermark.
In the Printed Watermark dialog box, click either Picture watermark or Text watermark.
Select the picture or the text that you want to use, and then click OK.
Steps to reproduce the issue
Start Word 2007.
On the Mailings tab, click Envelope, and then click Options.
In the Envelope Size list, click Size10, click OK, and then click Add to Document.
On the Page Layout tab, click Watermark, and then click CONFIDENTIAL, Diagonal.
The watermark text, "CONFIDENTIAL," should resize so that all the text appears on the envelope.
The watermark text, "CONFIDENTIAL," is truncated at both ends so that all the text does not appear on the envelope.