$21 Billion 10 Year Auction Closes At 3.39%, As Primary Dealer Take Down Is Lowest Ever

Tyler Durden's picture

Today's 10 year $21 billion auction closed at 3.388%, an increase from last month's 3.34% and the highest since May 2010. The Bid To Cover came at a strong 3.30 compared to the one year average 3.12, and much better compared to last month's 2.92. The reason for the strong auction, which has caused 10 Years to pare their losses on the day is that indirect bidding jumped, and took down a whopping 53.6%. Just as importantly is that Primary Dealers, read the Fed's shell intermediaries, bought just 31.6% of the auction (with 14.9% going to Directs): this is the lowest primary dealer take down ever (at least according to our database)! This is very surprising as the Fed continues to have to monetize every single auction eventually, which means that China et al, who make up the indirect bidder roster, will have to flip their bonds to the Fed sooner or later, presumably at a profit. This also confirms our observations that PDs have become allergic to US paper in recent week, with PD UST holdings plunging by a stunning $70+ billion since late November. This trend appears to not be reversing for now.

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HarryWanger's picture

Isn't it a positive indicator when indirects take the bulk of the auction? Doesn't that show confidence and international demand for US treasuries? How is this a "bad" thing? Seems quite the opposite to me.

Tyler Durden's picture

Please at least read the post before commenting

HarryWanger's picture

I did, TD, but fail to see how foreign demand is a negative. On the contrary, it appears that PD holdings falling again keeps rates in check a la Bernanke's overall thesis. 

It's also positive for equities as the money flow will continue into the stock market. Sure, down the road somewhere in the future (I've gone on record here saying we're at a minimum two - three decades away from any fall out) it will matter but so can a ton of other factors influence and change or economy during that time frame.

ZakuKommander's picture

So highest yield since May 2010 and China getting to flip for profit are good news to you.

Id fight Gandhi's picture

Im seeing more and more people and blogs taking shots at ZH. Is there anyway I can be more involved and help out?

Tired of the bias news elsewhere and smug fed loving, never fall market ideology.

mark mchugh's picture

I think that reflects the fact that ZH has become a force to be reckoned with.  They tried ignoring ZH as long as they could and that didn't work.

I don't know if the people you're talking about deserve a response at all.  Besides, there's no such thing as bad publicity.

asdasmos's picture

and so Bernanke should be again chosen for Time's person of the year award for this and other accomplishments.... right Harry?


All is well in Harry's bizzaro world. Nothing to see here folks.

HarryWanger's picture

Sure, why not? He has once again shown that he can make the economy roll through monetary policies. Has anyone else faced this type of challenge and emerged successfully without going into a World War? No.

So yes, I would support Time if they made him Person of the Year again.

asdasmos's picture

You are the Tyler Durden of bizzaro world.


Hopefully science will soon be able to transport you back as your site is without it's admin.

1100-TACTICAL-12's picture

Harry surely you are not this clueless, All benny has done is print money when that stops the house of cards fall. Do you not read about the States & pension funds broke, housing @ great depression levels, food stamps @ all time high, U6UE %20+. decades REALLY, Harry you are clueless...

HarryWanger's picture

We'll see down the road. Right now, I am correct. That's what matters is now. Anything can change the future negatively or positively. Right at this moment, however, there is much more positive than negative data regarding the US economy.

the rookie cynic's picture

I'm for getting more Wall Street kleptocrats in the White House and Congress. That's change I can believe in.

youngman's picture

If things are going so well..why are we selling debt...why not use the excess tax revenues to fund our needs.....????

cosmictrainwreck's picture

Good for you, Harry. Mom would be proud. NOW...I want you to try a little thought experiment. Take a deep breath, relax.... that's it... Now, visualize this: a scenario where the only possible way that the so-called "economy" of USA can remain in it's present levitation is that the US Treasury issues gazillions of dollars in debt...non-stop, 24/7, and those same gazillions are bought and/backed by a private bank in collusion with the federal gubbmint. Now can you see the TOTAL FUCKING ABSURIDTY of this scenario? I thought not, but what the hell? Worth a try. Carry on.

SDRII's picture

perhaps this is just nxt logical step for fed buying it directly via the carib banking center; saving the taxpayer money and all

101 years and counting's picture

PIGS buying US debt....flipping to Fed for easy profits.  How funny if they did?

rlouis's picture

"which means that China et al, who make up the indirect bidder roster, will have to flip their bonds to the Fed sooner or later, presumably at a profit."

Pay New Instant Dollars to China, for worthless US debt - I love that nominal "profit".  How we used to mock Bagdad Bob and his tall tales.  Amazing and yet tragic the cost and consequences of desperation.   

LawsofPhysics's picture

QE will work, until it doesn't. Get some equities as China and other start bailing out the E.U. nations.


Yes, we have significant room to "kick the can", at the very least, keep front-running the herd for now.  When it does go boom, what you have in your portfolio will be meaningless and how well you know and trust your colleagues and neighbors will be the only thing that matters.  Turn some profits in to hard assets for your children along the way. Most of us will be worm-food when the laws of physics and reality actually matter in the markets again.

CrashisOptimistic's picture

You have an overall feel for the physics of the situation, but you are not tuned to the specific logistics of the how and why -- which is oil.

Oil was priced at $26.10 on Dec 31, 1999.  Oil hit 147 before a single QE dollar was spent. When Ben says it is up because of emerging market demand, he didn't seem to realize he was saying "demand exceeds supply".  The answer to that is not going to be a supply increase.  He has not calibrated his mind around that: Supply is not going to rise up to meet that demand."  Simply that.

The ramifications of that truth define everything.

Logans_Run's picture

Honest question here? PDs taking a smaller piece of the action perhaps since they take a commission when the indirects tender to the Fed on POMO days? No need to risk capital (if there is any risk) to take down the initial offering if you get paid on the putback to the Fed? Just asking.

CurrencySpider's picture

A derivatives 'market' which intertwines, twists and ties multiple sovereign debts into the quadrillions. I call it "Sovereign Backed Securities", CDO's of gov't debts. Structured Global Vehicles which make the more simplistic US mortgage market look like a 3rd grader's art work. A global market so interwoven that it would affect every biological entity on the planet.


....we will sell them to the extraterrestrials who are paying us visits with those light shows witnessed day and night. The FED is Brilliant!!

bogey4's picture

I'm with Harry on this one.  Indirects taking down bonds is what that street calls "going away" business.  i.e. not "flippers." 

We don't really know how long they're "going away," but any bonds dealers buy are immediately for sale, so, for the most part, bonds sold to retail are off the market longer than bonds bought by primary dealers.


CrashisOptimistic's picture

These are not stupid people.  He prints money because if he does not, deflation will literally kill people.  He will make every dollar in the world worth less in oil forever if that will avoid killing even a single person.

Deflation kills.  Oil will kill more, but oil is not on his radar screen.  It can't be.  Geology was not part of his studies when it was always thought during his years in school to be infinite.  Oil is thought in his world to be a widget -- something that more of can be produced if the price is high enough.  There is no geology or chemistry or physics in that equation.  And it is that which will kill him, and us.

The point being, these are very smart people and they print because they have to and it's the only way they see to have even a slight chance of restarting normal economic behavior.  They are (and maybe rightfully) terrified of what would happen if they stopped printing.  Then you'd have not only housing wealth collapse, but also equity pension fund wealth collapse.

Death and killing would be inevitable.  They are regardless, but sooner if he stops.

LawsofPhysics's picture

precisely, barring the few that might escape to their personal (sustainable) habitats.  Nothing about the current population or anything the human race does collectively is sustainable.


I had to laugh when I heard outgoing Gov. Sunny Purdue (R) and incoming Gov. Nathan Deal (R) talk about how their policies will "grow the economy in Georgia" when they don't even have the fresh water reserves to support the business they have now.

Logans_Run's picture

What? And inflation doesn't kill? Dude I spent a couple years in West Africa. The natives get a little restless and violent when the price of rice goes through the roof. Particularly when rice is about all you can afford to eat.

sbenard's picture

Insanity has apparently become contagious!