$29 Billion 7 Year Auction Comes At Record Low Yield And Record High Bid To Cover

Tyler Durden's picture

And so the Treasury records continue, as does the reach for yield. Today's 7 Year came at the lowest yield in history or 1.89%, while the Bid To Cover surged to an all time high 3.04. And as we have been asserting for months, foreign investors continue to creep ever longer on the curve, with Indirects once again taking down more than half of the auction, or 50.24%. Directs oddly jumped by over 50% from August, taking down 13.38% of the auction, leaving the remaining 36.38% to the primary dealers. And so the divergence continues: those who no longer trade stocks (i.e., humans), are bidding up any fixed income paper they can get, even if it means being stuck for 7 years with a taxable annual yield of under 2%. At the same time the vacuum tubes are buying rental DVDs at a quadruple digit PE multiple. Obviously, this divergence is unsustainable, and the longer it persists, the greater the pain all around when it finally collapses.

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Silverhog's picture

Template this headline. Just change the numbers.

Nihilarian's picture

Speaking of which, does the bid to cover even matter? ie, does it even demonstrate the true nature of demand for these securities? Sure, there's a bunch of desperate people seeking fixed income in LDI strategies, avoiding equities, seeking anything above 0% return, or blindly rolling debt. But let's not forget that free money will always find its way toward these auctions. And the more of it, the higher the bid to cover will be. I say that, at this point in the fiat charade, a higher bid to cover is a sign of a massive ponzi.

StychoKiller's picture

I wouldn't call it a Ponzi scheme, more like trying to find an umbrella in a hurricane.  Like a Ponzi, collapse is certain.

Shameful's picture

Another day, another demonstration of the apparently infinite demand for US debt.

Spalding_Smailes's picture

Oh , soooooo so much credit/debt has been created over the last 30 years. They need dollars to pay off said debt/credit obligations...

Ned Zeppelin's picture

Think of it more as a very large pool of USDs out there which are hanging around and available, with nothing else to do, but to be parked at those low rates. Think of USDs as the "free floating" units of liquidity, and Treasuries as vehicles to "soak" up free USDs and park them offline for a while, in exchange for a small additional pile of USDs,  which in turn eventually get soaked up, with the supply of USDs growing constantly.  You need USDs to buy Treasuries. Treasuries only turn back into USDs.  Back and forth, back and forth. . .

USDs and Treasuries: Perfect Together. 

Can't believe that rate.


SheepDog-One's picture

7 year bond pays 1.9%, 2 year CD pays 2.4%, why would anyone but a lunatic buy a 7 yr bond?

keepmydollar's picture

Because they are waiting for the yield to drop to 1.8% in a week so they can take a capital gain on it.  It's not the rate that people are buying it is the fact that the Fed has backstopped the bonds.

I agree this is stupid, but short treasuries at your own peril.

davidsmith's picture

Your cri de coeur (the cri de coeur of a petit bourgeois, by the way) would matter if your subject had any relation to economics.


It has no relation to economics.  It is all politics.  What politics?

drbill's picture

There is no treasury bubble! Just ask any Keynesian economist. The record low yields are a sign of how much confidence the market has in the long term sustainabilty of the Fed's economic policies. *Sarcasm off*


Spread the message: Central banking is the true "barbarous relic".

truont's picture

"vacuum tubes are buying rental DVDs at a quadruple digit PE multiple"

Hey!  Don't diss Netflix.  The Internets are back! 

I've been waiting for this blessed day ever since 1999, when some dumb@$$ analysts started looking at archaic things like "earnings".

Net-rentals are the new paradigm!  Down with stodgy brick-and-mortar!

Throw out that old PE ratio and use a new PE ratio: Price/Eyeballs!

Then you will see the potential that Netflix really has!

Mr Lennon Hendrix's picture

Nflx scares the crap out of me!  It is by far the greatest idea ever imagined for our complacent consumer economy.  Watch as this economy folds, the price should go up by a magnitude of maybe 5 from here.  No joke.  What else will everyone be doing around Xmas other than watching cheap flix?  And for anyone out there that underestamates the power of entertainment, just come towards the light, and pay no attention to the net.  Weaving spiders, what have you.

Spalding_Smailes's picture

The anti netflix ... Free. Get the latest movies as they hit the big screen, in HD.Download to your ps3 ect ...


Riesgoso's picture

Guys check out these charts I made...


Fundamentally I think bonds should go down...the deficits the us is running don't warrant these low rates..


However, the bond-stock relationship shows that stocks are overvalued.


If the FED doesn't QE again I think we will see powerful downturn on asset markets.  It would be better than out of control inflation.


The problem that I see is that the FED will implement new QE and stocks, gold, commodities, will keep on rallying.


Check the charts:


S&P- 10 Year Treasury Oscillator:http://tiny.cc/t7af1 S&P vs 10 year: http://tiny.cc/clx9a

themosmitsos's picture

Pancake gonna keep getting flatter. Aunt Jemima yum-yum

tmosley's picture

At what point do they turn into crepes?

Maybe we can stop this madness then.  Wouldn't want to look European, after all.

cnbcsucks's picture

So, I guess since everyone feels so giddy and confident about equities, they're falling all over themselves to get into treasuries and gold...? 


WaltzTangoFoxtrot's picture

"Auction Comes At Record Low Yield And Record High Bid To Cover" Again!




Shameful's picture

It's the perfect storm.  You have Zimbabwe Ben at the helm of the Printer Armada, a worldwide currency war, and mangers trying to squeeze out any "safe" yield.  It will go bad and cause a world of pain and suffering, but lord only knows how long the ball is kept in the air.

Mr Lennon Hendrix's picture

You mean how long the ball is said to be in the air.  It is not; grounded it is.  No majik conjuring, no alchemic trix, just lies.  Blatant lies.

TheGreatPonzi's picture

Bonds are currently a good investment, because the FED will never let the USA go bankrupt without blowing up the dollar completely - which is not going to happen today, but rather in a year.

But my personal honour and integrity forbids me to buy any penny coming from the gov.

merehuman's picture

I shut my business, could have generated some business had i chosen it.

Ethics and integrety i will not sell by doing business with crooks and as long as i use and earn the "dollar" I am dealing with crooks. I would rather starve and keep my self respect.

Panafrican Funktron Robot's picture

Yields are gonna keep dropping quite a bit farther than this.  I have the 30 year moving to 2.75% pretty shortly here, the 10 at 1.5%.  I anticipate this happening before the end of October.

Shameful's picture

If they keep moving down I want the treasury to roll out a 100 year bond.  I would die laughing if they could move that lead balloon at less then a 4% yield.

goldmiddelfinger's picture

I'll sit up when the auction does not have a record low yield or BTC

b_thunder's picture

PDs loading up on treasurys, only to dump them to the Fed in 2 months time???


Cognitive Dissonance's picture

Obviously, this divergence is unsustainable, and the longer it persists, the greater the pain all around when it finally collapses.

To the supporters and promoters of the Ponzi there is no tomorrow. Thus they will do everything and anything they can to make sure tomorrow never comes. Or die trying. What do they have to lose?

That's not a rhetorical question. If letting the Ponzi "fail" means total systemic failure (at least in their eyes, which may simply mean loss of their power) how bad can the continuation of the Ponzi be?

At this point and in their minds it has become the lessor of the two evils.

Turd Ferguson's picture

"To the supporters and promoters of the Ponzi there is no tomorrow. Thus they will do everything and anything they can to make sure tomorrow never comes. Or die trying. What do they have to lose?"

This is 100% correct. My friend, CD, succinctly summarizes. Nice work.

Ned Zeppelin's picture

They're leasing the 2 evils? What's the rate per square foot and which evils, precisely? I hear gluttony is leased out for like 99 years.

Cognitive Dissonance's picture

$1,313 per square foot.

And I suppose you've never made a spelling error. :>)

RockyRacoon's picture
"To err is human, to forgive is divine"  -- Alexander Pope

tmosley's picture

No, that only gets you a couple of square inches at best.

Though you could probably hammer that much into a nice big sheet.

DaveyJones's picture

I thought he meant who was shorter, ben or tim. But if they're really for rent which one has the view of armageddon? 

Shameful's picture

What about another take on it, what if they want to make sure that when tomorrow comes it's a horrible as possible?  That they want a system failure.  When does change come about?  It comes when there is uncertainty, chaos, and conflict.  How better to assure these things in the century of change then to manufacture them, and as a side benefit be able to loot with wild abandon? 

That in their minds they are heroes for bringing this new world about and breaking the backs of the consumer societies and bringing in an age of austerity, to save the earth and all themselves and their progeny access to the worlds resources.

RockyRacoon's picture

It's fairly obvious that the looting of the Treasury has some ways to go yet.

The populace still have some net worth so that needs to be stolen.

Just watch the "laws" coming out of our legislative branch for signs.

Shameful's picture

Actually there is not much wealth left.  I sat down and thought about it and the USA is almost unencumbered asset free.  House prices are down and many are underwater.  Gold holdings or other items of small size and high value are uncommon.  Most people have loans on cars which are too under water.  Retirement investing is largely held in piggy banks that can't be gotten to without paying fees and jumping through hoops.  With the talk about taking the 401ks and retirement assets America should be just about stripped clean of any sizable equity.  A recent poll showed 77% of Americans live pay check to paycheck, and more then 40 million on food stamps.  There is not much left to steal except those retirement accounts.  Hell they don't even need to seize them, with the control of the market and no yields on treasuries they can expropriate them at their leisure with the power of the printing press and market manipulation.

On the plus side maybe people will finally stop talking about how "rich" America is and how we can afford to do anyhting because of our vast "wealth".

RockyRacoon's picture

The U. S. does have a book value, and I was also wondering what that might be.

With the housing stock deteriorating that is in decline.  Bad signs ahead.

Cognitive Dissonance's picture

You're talking about a higher level of control, something most people don't believe is possible. You know, it's that conspiracy theory thingy.

I agree with your supposition. But what is the use of talking about this level when most people can't even see the level above the most basic, that of government and day to day politics. To speak of a second and broader form of politics, where strategic alliances are created between seeming enemies which must never be acknowledged in public. Oops, it's that conspiracy theory thingy again.

Of course, there's even an additional level of control or manipulation which goes by many different names, all of them mocked and repudiated both by the keepers of the public myth as well as their idiot savants.

We are so conditioned to believe in our individual "freedom" that it would never occur to the average Joe that our so called freedom is so narrow as to constitute control rather than freedom. Just because the rat has a big cage doesn't mean s/he is free.

And now we return you back to your regular normal programming.

Shameful's picture

He that hath ears to hear, let him hear.

Why should we sugar coat it and play on the smaller level?  What does it matter if low level underlings get burned should the power system stay in place.  Indeed them getting burned almost does a disservice because the common man with start to wrongly believe in justice and that the system is fixed when all that happened was a branch was trimmed.  This is my fear for the 2012 election, that one band of looters will be removed and a more vicious bloodthirsty batch put in, and the people will go back to sleep for a while.  Look at the cycle, each congress and president is worse then the last, like clockwork.

What good does it do to try to bring a person up to a the level of "Hey your government is destroying you" and give them a false scenario, but one that perhaps they will believe?  That is in itself deceptive.  That might make the next level harder to believe because now they are in the mode of thinking to the simpler scenario that is presented.  This is used in the red vs blue, "Oh those _______ did _________ which is killing America!", they don't have the whole picture so they will be trapped endlessly moving in circles.

I understand most people won't ever get it, that's normal.  In our culture it's a negative to sit down and really think about situations.  Many here do think, because not thinking caused them pain, such as getting hammered in the market.  Pain brings thought and clarity.  As the pain increases so does the chance to reach people who have endured enough to let the scales fall from their eyes.  Even still I expect them to be the small minority, but such is the way of things.

Cognitive Dissonance's picture

The teacher appears when the student is ready. I have found that less than half of those who say that are ready and willing to begin the process of un-learning before they begin to learn will actually put forth the energy needed to do so. It's much more than one or two evenings of reading.

These things must be learned by self examination and discovery. Very few, very few, will learn this and then believe it simply from being told. This large an upset to their worldview shocks the self, the ID, the ego to the very core. And then some more.

I would say, again from experience working with others who say they are ready, that easily half or more of the people who are willing to go down this path and then expend the energy will still turn back at the first or second profoundly disturbing cognitive dissonance. There is no teaching until the student is ready.

DaveyJones's picture

it's not just a big cage, each one comes with a complimentary wheel

Cognitive Dissonance's picture

There are also cages with dual wheels for the tag team partnerships called marriage.

ShankyS's picture

BINGO CD! The end game has come and gone. It is all about avoiding total anarchy at this point. FIMA camps at the ready. I'm guessing they saw this coming years ago and are finalizing the socialist agenda at this point.

StychoKiller's picture

Unfortunately, flywheels can only be spun so fast, then metal/material fatigue from the forces involved will tear said flywheel apart!  Wear your safety goggles.