$21 Billion 10 Year Closes At 3.448%, Bid-to-Cover at 2.62 (Previous At 3.01) - Ugly Auction

Tyler Durden's picture
  • Yields 3.448% vs. Exp. 3.421%
  • Bid To Cover 2.62 vs. Avg. 2.83 (Prev. 3.01)
  • Indirect Bid To Cover: 1.79
  • Indirects 34.9% vs. Avg. 40.88% (Prev. 47.7%)
  • Direct bid at 8.94% (compared to 4.5% in November)
  • Indirect bid at 34.9% (49.3% in November, 47.3% in October - foreigners are slowly shutting out the US)
  • Alloted at high 67.28%

Very ugly auction:

Some more color from Morgan Stanley's Igor Cashyn who agrees with the conclusion that this was a surprisingly weak auction:

Key observations from the 10-year Treasury note auction are:

  • Sponsorship meter: (Weak)
    • The bid-to-cover of 2.62x was very weak compared to October’s 3.01x and September’s 2.8x reopenings
    • Indirect bidder participation of 35% was very low (vs. 47% in October and 55% in September)
    • The indirect accepted / tendered ratio was 56%, a bit weak and indicates that indirects might have bid back
  • Tell of Tails: (Weak)
    • The auction tailed 4.3bps with a stop-out yield of 3.448% - the largest since at least 2006
  • Market Follow Thru: (Weak)
    • Price action was choppy this morning before getting to the highest levels on the 10y at 3.40%. Post auction,
  • the market initially sold off as much as 6bps on the 10y, before coming back to being off 4bp on the day. No time for hitting the panic button yet, although we still have to get through tomorrow’s $13 billion of 30y bonds.

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Anonymous's picture

You need to resend our foreign banks the "green shoots" memo.

Anonymous's picture

There is a typo, the title should read 3,448 and not 3,48 as per the post.

trav777's picture

this is a dislocation waiting to happen...all the volume is crushed into the shortest maturities.  When "they" figure out the transition, bonds will crash

Lionhead's picture

From your lips to God's ear; waiting patiently to short treasuries.

Lux Fiat's picture

Perhaps Blankfein is already biting..err shorting, the hand that feeds him?

ex ante's picture

yoy they doubled supply at half the wac


the carry trade is in bonds not stocks - so the Fed is subsidizing the dealers purchase of debt that is being issued to pay for the bailout of the dealers themselves?  only on Wall Street..... 

Steak's picture

If you are looking for a bond crash, look at Greece.  Even after all the BS they're going through their short term debt is still only 100bps higher than Bunds (recalling an earlier ZH post off the top of my head).

Either way we don't need a bond crash to get an economic collapse...8% mortgages would be enough to destroy the housing market (turning the rubble into sand type stuff).

Plainview's picture

It's more now ... but the point is that the Greek bonds include a premium based on the probability that the EU (read: Germany) will not allow them to default and will bail them out. If Greece was not in the EU the debt would be, I suspect, worth 50% less.


My own personal belief is that Germany will not bail them out but will concentrate on isolating, somehow, the Euro from such an event - though I'm not sure that's possible.

Steak's picture

Your observation led me to a funny thought.  Do Treasury prices include a premium based on the assumption that the Chinese won't allow us default, or at least will continue their purchases with vigor? 

Ned Zeppelin's picture

Orleans Homebuilders is biting the dust as we speak.  Among other profound debt ridden difficulties, getting NYSE-Amex delisted for failing to turn in their 3Q results. You can just hear the Sarbanes-Oxley office banter: "I'm not signing that! You sign it!"

Say bye bye.


Anonymous's picture

Mysteriously,and despite the unlimited amount of that paper,the yield somehow manage to stay bellow 3.5%. Just enough to keep the mortgage rate bellow 5%. How much more deposits are still in banx coffers?and after those deposits run out,would primary dealers (please forget about the rest,we know those are immaterials)still be able to offer that rate?or precisely,would they still be able to offer those rates after their inventory of SPY that they currently use to offset any loss from those tbs purchases run out?

Anonymous's picture

wake me up when the yield hits 4.0

cocoablini's picture

Hey, it's over 2.5. No meltdown yet

lsbumblebee's picture

That would explain the blatant attacks on gold this week, along with the coordinated nonsense about a "bubble" from the MSM.

Greyzone's picture

Long term I am a believer in gold myself but nothing in the financial world moves in a straight line, up or down. And given the meteoric rise above $1200 per ounce, I'm not surprised at some pullback. In fact, I could see a good bit more pullback if the herd instinct kicks in at the same time as we get some sovereign defaults. The financial world has been "taught" that the dollar is their safe haven. In the event of some sovereign defaults, there will be a flight to dollars even if it doesn't make sense. Now after that flight to dollars occurs, lots of the sheep will look around and start wondering if they are in the right pasture or not.

And just to reiterate, I personally still expect gold above $2000 per ounce by December 31, 2011 and maybe sooner. But I also know that the road to that price won't be smooth because if gold goes that high, the rest of the world's economic engine will be dying.

lsbumblebee's picture

I'm not saying this isn't a healthy correction, but there's no doubt in my mind there is obvious manipulation in the gold market, and its been especially brazen since the phony BLS numbers on Friday.

merehuman's picture

I agree. I have been watching the correlation of ust sales and gold,silver and oil drop . Week after week , i was hoping someone else would notice. For whatever its worth USdebt clock.org is dishonest as well. Had i not been watching and waiting i would never have noticed the 3rd 9 failed to turn to 0 and therefore it gave us an extra week before the clock manipulators allowed 12 trillion.

Now i am hearing accounting rules for banks will be left up to regulators rather than standards

As  a german immigrant (1963) this is the first time i have thought about returning.

Being poor in a poor country i can live with. Having to live under a criminal government  is morally

 repugnant. The fact that regulators and the law are part of this boggles the mind. Whats more amazing

 is that the average folk have no idea and wont until the curtain falls. Lets hope its soon, i would like to

 rebuild and hopefully  see a better USA  before I leave the planet

lsbumblebee's picture

You're so very right. The great German-American H.L. Mencken said, "I believe that all government is evil, and that trying to improve it is largely a waste of time". I hope we all find a better way.

trav777's picture

dollar isn't "safe," it's just what most of the world's debt is denominated in.  Hell, foreign nations even source dollar debt.  The "flight to quality" last year was not to quality, it was demand-driven solely by redemption needs for deleveraging.

That's the biggest hoax out there, that the US dollar represents in ANY way any kind of "quality."  We're utterly fucking bankrupt.  It's just that a lot of parties all over the world, businesses, sovereigns, etc., borrowed and lent in dollars and suddenly there was a need of them to get out of dollar positions.

The foreign CBs couldn't print them, thus the massive FX moves.  We have swap lines now to prevent that again.  Look at a FX chart for the past 2 years and see how the DXY pretty quickly came right the fuck back down to where it was before the 08 deflation scare

Anonymous's picture

To TD:Since you reffered to TCW fiasco,any idea where are they going to dump their MBS on?Any volenteer between the pension funds communities?Or may be Harvard endowment will find sudden treasure in those papers?

Anonymous's picture

can anyone please explain to me the importance of the bid to cover, and indirect bid to cover statistics?

Dantzler's picture


Bid-To-Cover Ratio is a ratio used to express the demand for a particular security during offerings and auctions. In general, it is used for shares, bonds, and other securities. It is computed in two ways: the number of bids received divided by the number of bids accepted, or the total amount of the bids is used instead.

The higher the ratio, the higher the demand. A ratio above 2.0 indicates a successful auction comprised of aggressive bids. A low ratio is an indication of a disappointing auction, marked by a wide bid-ask spread.[citation needed]

For example, suppose debt managers are seeking to raise $10 billion in ten-year notes with a 5.125% coupon, and in aggregate the bids are as follows:

  • $1.00 billion at 5.115%
  • $2.50 billion at 5.120%
  • $3.50 billion at 5.125%
  • $4.50 billion at 5.130%
  • $3.75 billion at 5.135%
  • $2.75 billion at 5.140%
  • $1.50 billion at 5.145%

The total of all bids is $19.5 billion and the number of bids accepted would be $10 billion, therefore leading to a bid-to-cover ratio of 1.95

SayTabserb's picture

Ugly indeed. This is ominous, since there's an awful lot of this crap to sell next year. I guess the Cornucopians like Marshall Auerback and Dean Baker will get their theory of an infinite supply of money available to a fiat currency printer tested sometime in the early next year. The Treasury can print, deposit with the Fed, the Fed can give it to the Five Families, they can buy the scrip. Is there a specific toner company to go long with?

Assetman's picture

I wouldn't characterize this as an "ugly" auction at all.  I think the Treasury is tickled pink that they are capable of still issuing 10-year notes and still be able to get them done at a yield below 3.5%.

If you want "ugly" go back and take a look at that Latvian government bond auction several months ago-- where NOBODY participated.  Now that was U-G-L-Y.

At the margin, this auction does show the challenges the Treasury will have in upcoming new issue deals, though.  Sure, they would like to channel as much new issuance as they can at 7 years and above.  Unfortunately, most of the interest will be at 2 years or less.

SV's picture

As much uncertainty about the flakey nature of spending and such, most are wise to being in short duration paper.  It's a quandry, as more debt in the short term is rolled, that places greater pressure when they have to extend and pretend.  Get your popcorn, it's gonna be a doozie when they see Indirects dive another 30% MoM delta and Bid to Cover drop below 1.75-2.

ZeroPower's picture

Do you recall the yields Latvia was offering?

Assetman's picture

Yeah... it was pretty much a rounding error.  Well, except perhaps for Latvia.

Anonymous's picture

The mere fact u r mentioning the Latvian bond auction debacle, is proof enough this was a bad showing for the US auction.

trav777's picture

Nobody knows who's buying our bonds these days tho...seems to be  a big circle jerk.

Doesn't mathematically seem like there's enough capital out there to absorb what we're trying to issue in '10...we'll see.  I would not bet on the USA given the balance sheet

Anonymous's picture

It's never ugly until an auction fail. There can never be an auction fail so long as monetization continues.

Remember it's approaching the holiday season. The big players love to jam the little man at his weak and poignant moments. They will play their trading games until you puke up all your treasury shorts, your Gold longs, your dollars shorts etc.

Your gov't have failed to regulate, has conspired against your interests and regularly provides inside information to primary dealers about the biggest of markets (gov't debt auctions, currency moves). The US gov't is a hedge fund with an unlimited printing press balance sheet and you, their plunder.

This is the mischief of fiat money, concentrated power, and no check-balance.

If you think this is a new game, think again. The new world order is just a variant of the old world order.

You work. They consume. You provide labour. They provide money printed from nowhere and strip all bare over time with onerous interest.

Bow down and submit to the yoke. War is over. You lost.

Anonymous's picture

Couldn't have said it better myself.
Being long Gold and short the dollar is no a suicide mission. Yes, Gold will go higher at some point, but the second quarter squeeze on Gold longs is now begining. Remember in April - June all the short squeezing going on? Here we go again.

Rusty_Shackleford's picture

By now your name, ip address, and particulars have been fed into every laptop, desktop, mainframe and supermarket scanner that collectively make up the global information conspiracy.

Bubby BankenStein's picture

I agree with much of what you say, but personally do not feel subjugated by anyone or anything.

One of the most powerful weapons of PsyOps is to demoralize people and instill a sense of helplessness and shame since we seem to be trapped in an awful situation.

This situation the USA is presently in is chicken shit compared to what this great country has been through.  Our people should not be underestimated.

Ivanovich's picture

Market pushing to new daily highs, so apparently this hasn't scared anyone but us.

Steak's picture

Also did anyone notice the 1month today?  Zoom, to the moon!  Perhaps bond folk were fat on their 1 month purchases and had less left over for the 10yr.

Anonymous's picture

What does "Indirect Bid" mean?

ZeroPower's picture

Bids coming from non-US parties

bbbilly1326's picture

I thought I had read on this site a few month ago, that the indirect bid category had been changed to include all bids except primary dealers and US citizens..........so that the FED could buy under the radar.


I could be wrong though.........:~)  ............my tinfoil hat talkin'

johngaltfla's picture

I think I've mentioned things like this might happen in my past rantings and fictional stories. Guess what boys and girls? 2.62 will be a GOOD BTC in the future and called a reason for equities to rally. Too much supply, too many morons thinking we could paper the world over.

You want hyperinflation? You're going to get it.

Anonymous's picture

UGLY??? How?? 2.62 BTC. Zero Hedge continues to spin all of the news to the downside, all you do is mislead the non-tsy traders out there. MISINFORMATION!!!! There was only a 2 bp tail. Come on you have to stay out of trying to quote all of the auctions as bad, you either say "the fed is buying", although QE is OVER and then the first auction with a tail you call ugly. How about this stick to making up stories about GS? Better yet try to inform the people who ask what a indirect bid or bid to cover is after every auction? Rant Over, I will never visit your site again.

Anonymous's picture

"Rant Over, I will never visit your site again."

We will miss you.

merehuman's picture

good riddance and take your stinking dollar with you

Cursive's picture

I'll try to make some popcorn for the 30-yr. announcement tomorrow.

Anonymous's picture

Gold bounced off 34 day moving average intraday and will likely rally with spx until YE.

ZeroPower's picture

Is the 34day significant as a MA? Not a TA expert so curious to hear about this.

lsbumblebee's picture

I'd like to know too.

By the way I wish I could get a close up of your avatar. Oh Canada!

Tic tock's picture

What I don't get is why no country has moved its currency onto a Gold standard yet. In the face of all this uncertainity, wouldn't that be the smartest thing to do? Then just sit back and wait for the dust to clear..

And another thing...

most of the time laissez-faire markets are a pretty bad idea- lots of larger interests working behind the scenes to corner vulnerable pockets of wealth- but when there's a situation where so many interests are aligned, is when the market-clearing function is truly useful; gets the job done quickly like, y'know. Govt. steps in to protect little kittens from being roasted..and that means you 'GS'. .

I mean, now what happens.? There is no more resemblance to the financial world we had the day before yesterday. Essentially I'm hazarding that we have entered the world of State Capital and Credit only. 


Wa-hey! States and nations come and go. That and other slogans..   


Anonymous's picture

Ahh yes, those silly dollarbugs still have full faith in the USA's ability to pay back their massive debt while somehow dreaming at the same time the USD will gain in value. The USD has been drastically losing value and buying power, with losses being over 95% and having never had a long-term gain. The longer those silly dollarbugs hold their paper notes the more value they lose.

Silly dollarbugs, yet maybe one ay will be there day. 100% doubtful given historical data over many decades, yet they can always hope.