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$13 Billion 30 Year Auction Results: Primary Dealer Stick Save Prevents Rout
Is this the gray swan? The 30 Year auction just came in at 3.852%, which in itself is not remarkable, although as the highlight on the chart below shows this was an inflection point in the high yield which for the first time came in higher than the previous auction (3.82%), and could be the critical rate rise everyone is expecting. And with the 10s30s at record highs (how is that flattener MS/BofA?) this pretty much shelves any hope for America to follow in Mexico's footsteps and issue 100 Year notes. What is most troubling is that even as all other auctions keep coming at tighter and tighter spreads, the 30 Year has decidely broken away from the pattern. And the Auction itself was ghastly: the Bid To Cover was 2.49, the lowest it has been since February, and would have been far worse had Primary Dealers not singlehandedly carried it on their shoulders. PDs took down 58.6% of the auction, the highest since May of 2009! And, as we feared, Indirects are no longer chasing for yield, but are demonstrating to the US what happens if and when America decides to go into trade and currency war mode unilaterally. At 32.4%, Indirects took down the least amount since March. If the yield on the 30 Year continues to rise, this, much more so than a failed auction, will be colored swan that Zero Hedge has long been looking for. Keep an eye on the 10s30s. If it goes parabolic here, it could get very ugly, very fast.
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And lets just continue to poke China...then things will really get ugly even faster.
No way out - if things continue as they are, we are fucked, if we get into a spat with China, we are fucked, but the more i think about it, i am thinking Obama et al are smarter than we give them credit for. Seriously. If you were about to strategically default, wouldn't you run up your credit card first?
You have to wonder if that isn't our plan.
Make no mistake about it. The end game is hyperinflation and a collapse of the USD. Despite that pesky problem of social unrest for a bit, it will allow the US to emerge literally debt free (inflation destroys the value of debt) and in a position to retain some level of global strength and influence.
Don't think for a moment the US Gov't has not already run these scenarios. It's the only way to get out of this unsustainable mess and retain world influence.
Does anyone really believe there won't be a buyer? Either the PD's, Directs, or otherwise. Its just a game, can I see the real books please.
Why don't they just add a new category called "Phantom"
Agreed. If "ifs" and "buts" were krugerrands and pandas, we'd all have a merry Christmas.
Cause then all the Brit banks would jump in thinking they were buying a Rolls.
Anybody familiar with being an American family living in Singapore?
It was OK...definite culture shock coming and going. I'm pretty sure I wouldn't want to be there when the SHTF, though.
Right, where IS a good place to be, South Pacific island with a fishing rod and lots of sunscreen?
I dunno, I think all places will be bad, just some less bad than others. And, having lived there and experienced the general animosity that locals have for ex-pats, I can firmly say that a small island with an extremely dense, unfamiliar, and passively hostile population is among the very worst places to be during a SHTF scenario.
30' sailboat with Barret 50 and assorted stainless shotguns. Lots of salt and flour, small still. meet up with the other friendlies out there.
Thx. It seems WAY overbanked...
Yeah, its main industry is finance without a doubt. The rest of the population outside the finance industry consists of middle to upper level managers of international firms, service industry workers, and lots and lots of small shop owners. If everything screeches to a halt, Singapore will die quickly. Ex-pats get eaten first, by their former nannies and drivers.
If you are familiar with Japan, is the transition harder than there?
Mr. Krugman, you have a message in your mailbox from a Mr. Wen Jiabao. He said you'd understand it.
ROTFLMAO!!!
All you have to do is watch the TLT. If it breaks, dollar screams, risk crawls into a closet and gets in the fetal position.
I was looking at an analysis of the 30 a couple of weeks ago where the author stated that if the LB closed below 133.06 it would then be a short trip to 129. If this scenario unfolds the LB could decline precipitously for six weeks or even longer. I would probably be a buyer after this correction spends itself. I think you are right that this will be perceived as the bond vigilantes coming to life (finally!) with all the attendant messiness in equities and commodities. Dollar should be nice elevator ride up though.
Even cnbc.com had this to say in their headline:
Bonds Add to Losses After Dismal 30-Year Auction
Now you know the world is out of whack.
No problem Harry, Yahoo!Finance headline says 'stock declines held in check by renewed optimist FED will do something' its really not a market its a religious cult...party on!
"Typical of any bear market rally, positive sentiment gets to an extreme while volume gets continually thinner" - Prechter
And gold and silver rally into the close.
Fucking Blythe has got to just be shaking her head in disbelief.
I wonder if JPM/Short PM cartel got tipped to start covering shorts at some point? I realize there is still a huge naked short position. I just can't imagine the CB's would allow the cartel to get put under for carrying their water...
The cartel will get their throats slit if it helps the CB's get by another day. There is no honor among thieves and the cartel is the new money.
"The cartel will get their throats slit if it helps the CB's get by another day."
This is 100% correct. The EE banks do not care how much money they lose shorting the PMs. They are simply doing their master's bidding (offering, that is).
How many billions have the banks "made" over the past two years by borrowing endless amounts at the discount window, only to take those funds and support the treasury market? If you've made $20B on that spread, you'll gladly drop 500MM creating and covering paper shorts if that's all that is asked in return.
Yep. She's pooping her panties right now.
Looking over the political and fiscal landscape, I cannot imagine why anyone, anyone in their right mind would want to loan the US Goobermint money for 30 years. Inflation is most certainly higher than the CPI, the CB's want MORE inflation, and are actively debasing the reserve currency. CONgress wants to spend, spend, spend. Entitlements are a train wreck.
This will not end well... that was for you Harry :)
I thought Tyler was a great believer in the curve flattener that the long end would go to zero? Can someone confirm? But surely the systemic risk of a banktrupt USA will now inevitably lead to a curve steepener and economic collapse, the greates shorting opportunity on earth for the last 10 years? Surely we go steep NOW, no matter what the FEd idiots do. Yes ?
Who knows what the Tyler's believe. They post all sorts of stuff so attempting to discern their position by the news flow would be fool hearty.
But Tyler, Yahoo!Finance says even though the economic data is crap and markets are down, selling was 'held in check' by renewed optimism the FED will 'do something or other'.....bwaaa ha ha ha haaaaa
Chart: ES and ZB
Stick save alright.
http://99ercharts.blogspot.com/2010/10/es-zb_14.html
Stocks got a nice bounce off that auction. All is well in the unicorn and rainbow world of the stock market.
And when the first bond auction fails its a rush to the exits by the bankers. Should have nationalized or bankrupted them while you had the chance in 08. Now the banks are still private enterprises free to do as they see fit with their backdoor agreement to buy t-bonds to get tarp. Now ask yourself when, not if, the bond bubble bursts and the money is back on the sidelines, where will it go next? Only viable place left. Commodities Bitchez.
If you thought that $147/bbl oil shock was bad in 08 you haven't seen Jack. Better trade in the ole Suburban while you can still unload it. For want of a better battery. I wonder what the electrical potential is between Au and silver? Lol. Hmmm. maybe the Amish are more prophetic than I thought. For me its the American Quarterhorse. Fastest ridable animal on the planet for 1/8 mile. Gods most forgiving animal and can be maintained on a yardful of grass and a coffee can of oats. Just gotta find those old Foxfire books on how to build wagon hubs.
I don't understand how a $30B bond auction can fail. POMO is $100B a month. The Fed buys treasuries. It seems that the question is who will shade the Fed's name at the auction. Either 1) I don't understand it at all (entirely possible), or 2) this is all spin, the debt is being bought by the guys printing the money, and we are Zimababwe.
Guess I'm gonna have to add gunsmithing to my woodworking skill set.
Just put in the order to blow out of PTTRX in moms 401K, up 10% since 11/09 when we went we went in it (including dividends)...100% cash 4 now, wish they had a gold fund in there could of done something with that last year
a mere rounding error. fear not, the fed is wise. [/sarcasm]
imagine if the Chinese sold some 30 year treasuries into the open market. It is their right to do that.
They've been trading off some of these in exchange for the Japanese products of shorter duration with the Japanese
Those 1% 10-year JGB's are just "loaded" with value too.
Laying the foundation to put 150-200b of this next round of QE firmly beyond the 10yr.
Yes, Mr Staley, this is what QE2 is all about, isn't it, support the bond auctions / monetize the debt.
Anyone who really believes it is about supporting the economy, well, guess again.
As the conundrum of Love Hate Love gathers impetus.
A fine ode to Fight Club as well
- Layne
http://www.youtube.com/watch?v=l9jX1KAKp78
Yep. Had that conversation with Assetman just recently.
http://www.zerohedge.com/article/bofas-jeffrey-rosenberg-blasts-qe2-says...
Bingo.
I relate that currently the 30:10 Yield Curve, $TYX:$TNX, is quite steep at 1.580. Of note the Zeroes, ZROZ are at the edge of a massive head and shoulders pattern, manifesting a huge bearish engulfing candlestick, this suggests they could fall massively lower in value. If they break lower, then those short TMF and UBT will be nicely rewarded. The interest rate on the 30 Year US Government bond, $TYX, is now in its fourth day of breakout and trading at 38.83.
I relate that currently the 30:10 Yield Curve, $TYX:$TNX, is quite steep at 1.580. Of note the Zeroes, ZROZ are at the edge of a massive head and shoulders pattern, manifesting a huge bearish engulfing candlestick, this suggests they could fall massively lower in value. If they break lower, then those short TMF and UBT will be nicely rewarded. The interest rate on the 30 Year US Government bond, $TYX, is now in its fourth day of breakout and trading at 38.83.
"Paging the bond vigilantes...Will all bond vigilantes please report. It is time."
Just wanted to note that baby swans (Cygnets) are gray:
http://www.chrislongley.com/gallery1/cygnets.jpg
Lovely. When do they grow the hooked talons and start breathing fire?
the end game is currency reform!
My question is that this is all interesting and all, but for whatever reason, we all know this is going to turn around and go the other way.
To think through that, what would that take? A flight to safety, right? King Dollar, back on top. What if Ben does a head fake and QE is not announced on November 3-4? There is certainly enough chatter against QE2.0 in the media and financial blogs that could be pointed to in a defense of not doing QE2.0.
But I don't see that - I see QE2.0 as being "in the cards" for many reasons. Now what conditions send gold packing, the yen back up, and the USD back on top?
If you know, don't be coy... I got 'nothin, and outside of divine intervention (think multiple solid gold meteor strikes that increases the gold holdings of every nation on earth by 10,000% while simultaneously taking out NK, Iran, NW Pakistan (and China so they can't ever cash in their treasuries)... Oh, and the Fed, too).
HAVE YOU SEEN THE TERM CHART OF THE VIX ??
ACROSS THE BOARD VIX FUTURES HAVE SIGNIFICANTLY DROPPED.
THAT MEANS ANIMAL SPIRITS--JUSTIFIED OR NOT--IN THE STOCK MARKET.
QUESTION IS, FOR HOW LONG??
Really this is a great post from an expert and thank you very much for sharing this valuable information with us.
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