Fixed upstream with:

commit 3c8be55c04eb2647fd5c9d51efae78f7afdcec85
Author: Peter Krempa <pkrempa>
Date:   Mon Jul 15 17:38:55 2013 +0200

    cpu: Allow fine tuning of "host-model" cpu
    
    https://bugzilla.redhat.com/show_bug.cgi?id=799354
    
    Until now, the "host-model" cpu mode couldn't be influenced. This patch
    allows to use the <feature> elements to either enable or disable
    specific CPU flags. This can be used to force flags that can be emulated
    even if the host CPU doesn't support them.

commit 13cdd389ed06e81277f208c269d825046cdbb4cb
Author: Peter Krempa <pkrempa>
Date:   Mon Jul 15 14:36:09 2013 +0200

    cpu: Add virCPUDefUpdateFeature()
    
    This new function updates or adds a feature to a existing cpu model
    definition. This function will be helpful to allow tuning of
    "host-model" features in later patches.

v1.1.0-193-g3c8be55

Moving to POST.

bug fix verification:
1. add cpu feature policy in xml

# virsh edit guest
  <cpu mode='host-model'>
    <model fallback='allow'/>
    <feature policy='force' name='avx'/>
  </cpu>


# virsh start guest
Domain guest started

2. check avx in guest:
[root@guest ~]# cat /proc/cpuinfo | grep avx
flags		: fpu vme de pse tsc msr pae mce cx8 apic sep mtrr pge mca cmov pat pse36 clflush mmx fxsr sse sse2 ss syscall nx rdtscp lm constant_tsc up arch_perfmon rep_good unfair_spinlock pni pclmulqdq ssse3 cx16 pcid sse4_1 sse4_2 x2apic popcnt tsc_deadline_timer aes xsave avx f16c rdrand hypervisor lahf_lm xsaveopt fsgsbase smep erms

3.
# virsh destroy guest
Domain guest destroyed

4. change cpu feature policy
# virsh edit guest
  <cpu mode='host-model'>
    <model fallback='allow'/>
    <feature policy='disable' name='avx'/>
  </cpu>

5. check avx in guest:
[root@guest ~]# cat /proc/cpuinfo | grep avx
 <no output>

6. check qemu arguments
# ps -ef | grep avx
qemu     14664     1  1 16:09 ?        00:00:12 /usr/libexec/qemu-kvm -name guest -S -machine pc-i440fx-rhel7.0.0,accel=kvm,usb=off -cpu SandyBridge,+erms,+smep,+fsgsbase,+rdrand,+f16c,+osxsave,+pcid,+pdcm,+xtpr,+tm2,+est,+smx,+vmx,+ds_cpl,+monitor,+dtes64,+pbe,+tm,+ht,+ss,+acpi,+ds,+vme,-avx -m 1024 -realtime mlock=off -smp 1,sockets=1,cores=1,threads=1 -uuid c43be7a8-e950-a68a-813f-40c7d771167d -no-user-config -nodefaults -chardev socket,id=charmonitor,path=/var/lib/libvirt/qemu/guest.monitor,server,nowait -mon chardev=charmonitor,id=monitor,mode=control -rtc base=utc -no-shutdown -device piix3-usb-uhci,id=usb,bus=pci.0,addr=0x1.0x2 -drive file=/var/lib/libvirt/images/r7m.img,if=none,id=drive-virtio-disk0,format=qcow2,cache=writethrough -device virtio-blk-pci,scsi=off,bus=pci.0,addr=0x5,drive=drive-virtio-disk0,id=virtio-disk0,bootindex=1 -netdev tap,fd=28,id=hostnet0,vhost=on,vhostfd=30 -device virtio-net-pci,netdev=hostnet0,id=net0,mac=52:54:00:e8:c9:02,bus=pci.0,addr=0x3 -chardev pty,id=charserial0 -device isa-serial,chardev=charserial0,id=serial0 -device usb-tablet,id=input0 -vnc 127.0.0.1:0 -vga cirrus -device intel-hda,id=sound0,bus=pci.0,addr=0x4 -device hda-duplex,id=sound0-codec0,bus=sound0.0,cad=0 -device virtio-balloon-pci,id=balloon0,bus=pci.0,addr=0x6
we can see there is "-avx" in qemu arguments.

According above, libvirt can handle cpu feature policy. So change the status to VERIFIED.

This request was resolved in Red Hat Enterprise Linux 7.0.

Contact your manager or support representative in case you have further questions about the request.