The 2-7 Year Treasury Issuance Paradox; Or Say's Law In Practice

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Fri, 01/29/2010 - 16:20 | 211280 curbyourrisk
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You guys are way above my pay-grade.  Thank you for being there.

Fri, 01/29/2010 - 16:30 | 211284 phaesed
phaesed's picture

Don't forget in the change in direct bidder methodology last year.

Nice article.

Additionally I'd like to point out that it could also be a function of the coupon themselves, which the Fed covertly cleaned out in the Quantitative easing efforts. As banks sold off the high coupon bonds, they purchased the lower coupon bonds at MUCH lower prices yielding exactly the same as the high coupon bonds, while moving the actual cash to their balance sheets. And leaving the arbitrage spreads the same.

The robbery continues.


Fri, 01/29/2010 - 16:33 | 211298 phaesed
phaesed's picture

Oh and FYI, Gap close on the SPY... don'tcha love how it's within pennies.... how exceptionally accurate eh?

Oh no manipulation... it's all a random walk.

Fri, 01/29/2010 - 16:29 | 211288 Orly
Orly's picture

Strange things are afoot at the Circle K.

Fri, 01/29/2010 - 16:50 | 211316 SDRII
SDRII's picture

where is JJ to refute the anaylysis - lol (selling the belly of the curve at the aspiring primary dealer)

Fri, 01/29/2010 - 16:58 | 211327 GlassHammer
GlassHammer's picture

I had to read it twice but great article.

(will probably read it a third time to get it to really sink in)

I really don't want to think about what happens when the FED pumps stop.

Fri, 01/29/2010 - 17:02 | 211332 Anonymous
Anonymous's picture

Question for the intelligentsia on ZH (from an ignoramus) -
The Fed has $1.6 T of short term debt due March 31 (or so I hear. Which bonds / bills will the Fed be looking to refinance in order to not get into trouble on this huge short term payment ? Or would they have get yields on all the treasuries across the board ?

Fri, 01/29/2010 - 17:17 | 211357 Anonymous
Anonymous's picture

Where you get that info (31 March and 1.6T) ?

Sat, 01/30/2010 - 00:18 | 211710 Anonymous
Anonymous's picture

The graphic is from a NYT article for which I cant get a link.

Fri, 01/29/2010 - 17:07 | 211338 Anonymous
Anonymous's picture

might be your best analysis / story yet ........ if all this data is accurate , the Wall Street Journal should want to re-run this story on Monday

Fri, 01/29/2010 - 17:10 | 211343 Anonymous
Anonymous's picture

Tyler geat research as usual - as long as the roll down on the curve is as rewarding as it is the zombie banks will continue to play the carry game in their non-MTM bank "held for maturity" portfolios - much like Japan has for decades. Meanwhile suburban Virginia new hedge fund formation continues to out pace Greenwich CT's....

Fri, 01/29/2010 - 17:36 | 211380 strike for retu...
strike for return to reality's picture

It's easy to have good numbers when you get to make them up.

So long as Treserve buys what they print, the numbers will keep looking good.

Didn't the Soviet collectives always report what their 5-year plans said they would?

Fri, 01/29/2010 - 17:45 | 211398 Anonymous
Anonymous's picture

Wasn't this "busted auction" supposed to happen by now? Last June? or Sept when the $300bil direct purchase program ended? 2 more monthly auctions and half of fiscal 2010 is in the bag. PIGS ain't gonna let it happen.

Fri, 01/29/2010 - 20:02 | 211564 Quantum Nucleonics
Quantum Nucleonics's picture

Could it be that as buyers go further out in maturity, they are pricing in not so much inflation, as default risk in a heretofore "risk-less" investment? (A sovereign default will, I guess, look like a hyperinflation event.)  I doubt there will ever be a "busted" auction, the Fed and Treasury will always step in to print some $$$.

Fri, 01/29/2010 - 23:34 | 211692 Species8472
Species8472's picture

Could be someone with a printing press buying on the sly. OR, a huge pile of money is really scared.


Sat, 01/30/2010 - 12:49 | 211862 Anonymous
Anonymous's picture

Nice twist on Say's Law.

Sat, 01/30/2010 - 16:40 | 212008 Alchemist
Alchemist's picture

Once again, you are missing the big picture.  The private sector is delevering and private credit has been collapsing at record speed.  Public borrowing is merely replacing the private credit contraction and aggregate debt levels are not increasing.  As private sector debt rolls off, it merely frees up balancesheet to replace it with Treasurys, which are attractive given the steep curve and the 0% risk weighting that they offer

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