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$35 Billion In 2 Year Treasurys Price As Primary Dealers Take Down Half, More Retirement Funds Squeezed To Make Room Under Ceiling

Tyler Durden's picture


The fact that the US is at the debt ceiling, and every incremental dollar of debt issued has to be met with a comparable underfunding in retirement funds is not bothering the SecTres (at least until August 2 at which point all mechanisms to delay the ceiling breach expire). Which is why today's auction of 2 Year paper passed with barely a glitch: $35 billion (CUSIP QZ6) priced at 0.56% (89.7% allotted at high), the lowest yield since December 2010. The Bid To Cover was a sizable jump to recent auctions, coming at 3.46, nearly half a turn higher than last auction's 3.06, and higher than the LTM average of 3.38. Not surprisingly, at 31.29% Indirect interest was the lowest since January, as foreign central banks and investors are dealing with tightening concerns of their own, meaning the bulk of the auction went to Primary Dealers (half) and the balance to Direct Dealers, who took down a 2011 high of 19.15%. The direct bidder hit rate was a surprisingly solid 32.22%. Nonetheless, with the WI trading almost on top of the auction High Yield, there were no surprise in the short-end of the bond market, where investors once again are forced to look ever further right for any yield, as short-term rates have plunged to lows last seen just when the equity market was about to flip over (not to mention the quirks currently in the money market funds which has snagged the shadow economy rather bad since the FDIC fee assessment was imposed).


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Tue, 05/24/2011 - 13:22 | 1305719 LawsofPhysics
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Indirects holding at 30%, what are those foreigners seeing?

Tue, 05/24/2011 - 13:40 | 1305823 Quinvarius
Quinvarius's picture

The question is what chart are you looking at?

Tue, 05/24/2011 - 13:45 | 1305845 LawsofPhysics
LawsofPhysics's picture

Just reading, "Not surprisingly, at 31.29% Indirect interest was the lowest since January, as foreign central banks and investors are dealing with tightening concerns of their own,.."  if these foreign central banks and investors are really dealing with tightening concerns, why show any interest?

Tue, 05/24/2011 - 15:24 | 1306346 camaro68ss
camaro68ss's picture

Cool, pull the plug on grandma with the new Obama care and steal from her retirement. NICE, only Obama could get away with that

Tue, 05/24/2011 - 16:23 | 1306560 LawsofPhysics
LawsofPhysics's picture

Ain't Nature a bitch. What is your solution?  This is what happens when accountability is ignored and fraud remains the status quo.

Tue, 05/24/2011 - 13:19 | 1305721 silberblick
silberblick's picture

Seems Obama is getting slammed not just for the debt ceiling. Black social activist and university professor Cornel West calls out Obama as being a part of the oligarchy and challenges Americans to rise up like people in Europe and the Middle East are doing. Read here:

Tue, 05/24/2011 - 13:25 | 1305752 Hedgetard55
Hedgetard55's picture

Cornel West: faux black intellectual lauded by faux white intellectuals.

Tue, 05/24/2011 - 13:28 | 1305766 Ray1968
Ray1968's picture


Tue, 05/24/2011 - 13:32 | 1305771 Bob
Bob's picture
You travel in real black intellectual circles, I presume.  How is Michael Steel these days, anyway?
Tue, 05/24/2011 - 13:36 | 1305817 TheTmfreak
TheTmfreak's picture

Sounds like quite a lot of assumptions you're making about opinions hedgetard55 would have to hold...

Tue, 05/24/2011 - 13:56 | 1305877 Bob
Bob's picture

Not really.  It's an equal opportunity insult. 

Tue, 05/24/2011 - 14:20 | 1306020 TheTmfreak
TheTmfreak's picture

While I find this statement pretty funny in itself, I think assuming that if somebody thinks a particular liberal "intellectual" is faux, he must be a Michael Steele fan, I'd say you're making an unjustified leap. Perhaps there are better "black" intellectuals?

But even then regardless of your opinion of Michael Steele I'm sure it has to be slightly higher than before since the GOP mainstream has thrown him overboard. He clearly wasn't GOP enough for today's crooks.

Tue, 05/24/2011 - 14:34 | 1306091 Bob
Bob's picture

Actually, Steele has been sounding more intelligent since he's been getting to know the folks at MSNBC. 

I'm not assuming anybody is necessarily a fan, just that he would be a poor example of a black intellectual.  I picked him simply because it's extremely difficult to think of alternative black intellectuals, but was pleased Steele worked here whether you're a republican, a democrat, or simply an independent "intellectual" yourself. 

Tue, 05/24/2011 - 14:53 | 1306189 TheTmfreak
TheTmfreak's picture

but was pleased Steele worked here whether you're a republican, a democrat, or simply an independent "intellectual" yourself. 


Now I'm confused. Mind elaborating?

Tue, 05/24/2011 - 15:07 | 1306252 Bob
Bob's picture

A partisan republican would be embarrassed by Steele, which is why he got canned.  A partisan dem would be embarrassed to be ridiculed as an apparent republican. And any intellectual would be insulted to be taken as a fan of Steele. 

Looks like I missed the target here . . .

Tue, 05/24/2011 - 15:24 | 1306288 TheTmfreak
TheTmfreak's picture

For some reason I thought you were all of a sudden advocating Steele. So right, I got you the whole time. Yes steele is a moron.

Although I REAAAAL intellectual wouldn't give a fuck if somebody thought he was a fan of some douchebag. You really can only be in the state of insulted if somebody insults you and you accept it (perhaps out of embarrasment).


Edit: In further reflection,  if somebody thought you were a Steele fan, you might just consider them a friggin' idiot.

Tue, 05/24/2011 - 13:39 | 1305819 NotApplicable
NotApplicable's picture

I was going to comment that it takes one to know one. I amazed at how well intellectuals like him (and Chomsky) can appear so intelligent, yet be so tightly blindered as to not connect the dots. (that they draw attention to!)

As for this attack, West is merely playing to his lefty-land base, trying to influence Obummer and the reelection campaign, while reaffirming his own lefty credentials.

Tue, 05/24/2011 - 14:06 | 1305918 narnia
narnia's picture

Chomsky is honest, smart & very well versed.  I disagree with almost all of his solutions (he inaccurately assumes liberty as more of an untested, impractical ideal than a practical solution), but I almost always agree with his evaluation of problems.

Tue, 05/24/2011 - 14:23 | 1306037 TheTmfreak
TheTmfreak's picture

People say similar things about Marx. (I know, personally, a somewhat psuedo-intellectual Black professor) "His  predictions are awful, but his critique of capitalism is spot on" Yeah right.

Tue, 05/24/2011 - 14:54 | 1306206 narnia
narnia's picture

Chomsky is an anarchist.  If you believe in liberty & laissez faire capitalism, you are much closer to anarchism than statism.

Tue, 05/24/2011 - 15:01 | 1306243 TheTmfreak
TheTmfreak's picture

I wasn't taking a stance, it should be fairly clear from my posts that I am anarchist. I was suggesting your argument was not very convincing because I (likely others) have heard the same thing about many others.

I have a hard time with people bashing Liberty. =)

Tue, 05/24/2011 - 13:30 | 1305762 metaforge
metaforge's picture

Very cool.  I have been impressed with the professor.  One of the few academics who seems to actually think for himself and not just play ball for the blue team no matter what.

Tue, 05/24/2011 - 13:36 | 1305798 Bob
Bob's picture

Even the educated liberals are increasingly coming to awareness:

Tue, 05/24/2011 - 13:49 | 1305849 jmac2013
jmac2013's picture

It's the credibility shell game.  Didn't West support Obama in the last election?  Now, to try and salvage his own credibility with his followers he needs to dish out some truth.  However, when next election rolls around West will support some other establishment lackey.  Later, he'll pretend like he didn't know that candidate was an establishment whore too, and the game will go on and on.

The "left" intellectuals who supported Barry will all start throwing him under the bus the same way those "right" intellectuals (use of that term loosely) were throwing Bush under the bus after supporting him.  It's all just mind warfare for the masses to try and convince them that "left" and "right" paradigm exists in the major US political party system.

Tue, 05/24/2011 - 15:02 | 1306247 TheTmfreak
TheTmfreak's picture

No kidding.

Tue, 05/24/2011 - 15:40 | 1306411 docj
docj's picture

OK, it sort of begs the question...

"those "right" intellectuals (use of that term loosely)"

Why, pray tell, do you you feel the need to qualify that statement?

Tue, 05/24/2011 - 13:20 | 1305725 Robslob
Robslob's picture


Wed, 05/25/2011 - 01:32 | 1305858 baby_BLYTHE
baby_BLYTHE's picture

I am depressed too. Not a single F*ck was given, either.

Tue, 05/24/2011 - 13:23 | 1305743 Bob
Bob's picture

Squeezing retirement funds to make ends meet.  Gee willikers, isn't that what's going on in Ireland, too?

Tue, 05/24/2011 - 17:54 | 1306869 SoCalBusted
SoCalBusted's picture

The Social Security "lock box" was the first to get raped.  Why stop now?

Tue, 05/24/2011 - 13:29 | 1305760 kito
kito's picture

in the land of the blind, the one eyed king continues his reign.

Tue, 05/24/2011 - 13:28 | 1305768 bugs_
bugs_'s picture

all your retirement are belong to us

Tue, 05/24/2011 - 13:29 | 1305774 kito
kito's picture

in the land of the blind, the one eyed king continues his reign.

Tue, 05/24/2011 - 13:38 | 1305811 Doyle Hargraves
Doyle Hargraves's picture

Just as the deaf economics professor from princeton continues his reign at the printing press despite the screams of the populace who wish to escape this horror...GUNS, GOLD, AND GAS BITCHEZZ!!!

Tue, 05/24/2011 - 13:35 | 1305813 Dolemite
Dolemite's picture

The days of BTFD might be coming to an end after these last 2-3 sessions

Tue, 05/24/2011 - 13:50 | 1305857 illyia
illyia's picture

Listening to Gretchen 'Reckless Endangerment'
Morgenson via NPR right now. Quite a clear discovery of fraud facts and timeline: Regulatory Fails and Active Crime.

This is not the first book to be written about the epic financial crisis of 2008 and neither will it be the last. But Josh and I believe that Reckless Endangerment is different from the others in two important ways. It identifies powerful people whose involvement in the debacle has not yet been chronicled and it connects key incidents that have seemed heretofore unrelated.

As a veteran business reporter and columnist for the New York Times, I've covered my share of big and juicy financial scandals over the years. For more than a decade as an established financial and policy analyst, Josh has seen just about every trick there is.

But none of the scandals and financial improprieties we experienced before felt nearly as momentous or mystifying as the events that culminated in this most recent economic storm. That's why we felt that this calamity, and the conduct that brought it on, needed to be thoroughly investigated, detailed, and explained. The disaster was so great — its impact so far-reaching — that we knew we were not the only ones who wanted to understand how such a thing could happen in America in the new millennium.

Even now, more than four years after the cracks in the financial foundation could no longer be ignored, people remain bewildered about the causes of the steepest economic downturn since the Great Depression. And they wonder why we are still mired in it.

Then there is the maddening aftermath — watching hundreds of billions of taxpayer dollars get funneled to rescue some of the very institutions that drove the country into the ditch.

The American people realize they've been robbed. They're just not sure by whom.

On "Fresh Air"

Tue, 05/24/2011 - 14:08 | 1305937 Herbert_guthrie
Herbert_guthrie's picture

The American people have been robbed.
They have even lost control of their own country.

Brought to you by the hand they broke free of in 1776.

Tue, 05/24/2011 - 14:50 | 1306167 SwingForce
SwingForce's picture

Robbed? Past-tense? Come on, The Robbery continues on an hourly basis here & now, it has not ended nor will it end until the robbees are broke. For Gretchen & Josh to say its over is to lose all credibility, I hope they clarify their viewpoints.

Tue, 05/24/2011 - 13:52 | 1305861 astartes09
astartes09's picture

Still trying to figure out how this works exactly. So if the Treasury raids retirement funds to pay for day-to-day operations, and if the debt ceiling isnt raised, wont that basically make every retiring federal worker screwed beyond belief?

Tue, 05/24/2011 - 15:00 | 1306236 Hansel
Hansel's picture

No.  Congress will raise the debt ceiling instead of making hard decisions.  When the limit is raised, by law the pensions will be reimbursed.

Tue, 05/24/2011 - 16:22 | 1306567 LawsofPhysics
LawsofPhysics's picture

and the taxpayer rape continues...

Tue, 05/24/2011 - 13:55 | 1305869 Doyle Hargraves
Doyle Hargraves's picture

As if that money was ever there in the first place....bwahahaha! See Social Security

Tue, 05/24/2011 - 14:24 | 1306044 downwiththebanks
downwiththebanks's picture

It was there to bail out the banker-gangsters.  And it's there whenever the call to slaughter more Black and Brown people.

So you're being pretty selective, aren't you, in declaring it gone.

Tue, 05/24/2011 - 14:34 | 1306094 Doyle Hargraves
Doyle Hargraves's picture

All it is is digits in a computer, nothing real. You could not go get it out of a bank...and I don't know about slaughtering any brown or black people, (how that has anything to do aith this I do not know), but i do know that the only money the gub'mint has is money it reallocates from its citizenry. As i said see social security, there is no lockbox and it cannot be disputed that a bunch of IOU's (bonds) exist in a filing cabinet somewhere in West Virginia saying we will give back the money by taxing more or creating more 'digits' on a computer to pay these obligations. Ever wonder why everything is encouraged to be direct deposit and debit cards have become the norm? Because not even a fraction of all the money the Fed and the banks have created exists outside of the virtual world. There is no physical currency to speak of its all digits in a computer at the Fed.

Tue, 05/24/2011 - 17:09 | 1306724 downwiththebanks
downwiththebanks's picture

You can say the money isn't there all you want.  You can say that it's just blips on a computer screen.

But those blips buy the drones and the missiles landing on the heads of people living in Palestine and Pakistan.  Funny how those blips turn to real assets when they're really needed.  

Tue, 05/24/2011 - 18:39 | 1307006 Doyle Hargraves
Doyle Hargraves's picture

When they are really needed?! We really need to bomb countries already in the stone age even further to the stone age? The only reason people accept the dollar is because 12 army divisions and 12 carrier groups stand behind it...I know I served for 10+ years and went on missions that still are not known to have happened by most people in the public today. The only reason they are real assets is because the military stands behind making those dollars real assets so we can participate in sh*tty wars in sh*tty places we have no business being in! Pray do tell me what happens when the kingdom of saud no longer accepts dollars for their oil? A lot of good all that fire power is when it can't move around globally. The world accepts dollars at the point of a gun. As far as Palestine is concerned I don't remember handling any business in that hell hole...I think Israel has that covered pretty well, Israel can handle their own business it hardly needs to rely on us. Don't start with that foreign aid bullsh*t either because we give the palestinians more than we give Israel in $$$ every year. The difference is the Jews made the land productive and made the country productive, if we cut off aid they would still be fine. As far as Pakistan is concerned when China came out and said the US must respect Pakistan's borders and sovereignty this last week, they were not just sabre rattling. Yeah those blips on a computer screen are only worth what the world thinks they are worth. Our biggest creditor China has been reducing its holdings steadily every month. Soon you will see that the world has little appetite for the biggest ponzi scheme ever perpetrated on them.

Tue, 05/24/2011 - 14:09 | 1305887 Doyle Hargraves
Doyle Hargraves's picture

They can have an EBT card, Section 8 housing vouchers and medicare/medicaid/obamacare for being stoopid enough to trust da gub'mint to provide for their retirements...BITCHEZ!

Tue, 05/24/2011 - 14:04 | 1305928 cat2
cat2's picture

Is there a chart of raided retirement funds to date?  Some kind of graph that shows the IOU to the retirement "lock box"?

Tue, 05/24/2011 - 14:07 | 1305949 Doyle Hargraves
Doyle Hargraves's picture

We know for sure they raided $35 billion today for a bond auction

Tue, 05/24/2011 - 14:33 | 1306060 cat2
cat2's picture

I'd like to see it in graph form so I can guesstimate how long before 401k's are "nationalized".  If I remember correctly, there is about $5 Trillion in 401k accounts.  So given that I would guess about the same amount in the federal retirement accounts?  So at say $120 Billion/month burn rate, that's 3-4 years the government can run raiding public retirement accounts before nationalizing 401k's.  Sound about right?

Tue, 05/24/2011 - 14:40 | 1306128 Doyle Hargraves
Doyle Hargraves's picture

I do not think that the Federal retirement accounts are that flush. Most of the older workers under CSRS have retired. The new federal retirement plan is based in large part on thrift savings plan and social security for most of its payout, according to turbo timmy geithner, the available federal retirement funds are exhausted at the end of July. They are already moving to nationalize 401K accounts, see this article. I wouldn't take anything I say to seriously though, I am just a hard money, gun toting, Austrian Economics type, clearly a 'barbarous relic' of past economic paradigms. Now let me go get my tin foil helmet on!!!

Tue, 05/24/2011 - 15:19 | 1306303 cat2
cat2's picture

Well, given that the debt cap/budget problem has been "solved" by simply taking the retirement funds, I have to take 401k confiscation seriously.  Maybe it's time to pay the penalty and take it out of the governments reach, esp if the public retirement accounts are gone at the end of July.

This trend to cannibalize any and everything cannot be a good sign.  Hard to know what to do.  Since your 401k can be cashed out (with penalty) and turned into real assets, maybe now is the time.  Could it be in a few months that is no longer allowed?

Tue, 05/24/2011 - 15:22 | 1306338 Doyle Hargraves
Doyle Hargraves's picture

Nope the trend is what dying empires do in the throes of collapse. Again I cite Zimbabwe, everything was confiscated including farmer's land. Nothing will be out of reach, now I am no wiz bang investor, but I keep stocked on gold, guns, gas, silver, and food. If anyone wants to take what i got to ensure my family and i make it through the hard times, they do so at their own peril. I am not saying you should take the penalty and take your money out of your 401k (Wall Street would collapse, they need that money to keep stocks artificially high), but i am saying you are a lot more trusting than i would be at this point.

Tue, 05/24/2011 - 14:38 | 1306132 RobotTrader
RobotTrader's picture

Once again.

I repeat.

Debt ceilings don't matter.

And obviously, China, Japan, Taiwan, UK, etc. are still happy owning Treasuries, as I'm seeing that the 10-yr. yield is still scraping 40-yr. lows and 90-day T-Bills are still yielding 5 freaking basis points!!!

Tue, 05/24/2011 - 14:41 | 1306142 RobotTrader
RobotTrader's picture

I mean really, the 10-yr. at 3.1% and the 5-year at 1.79%???

Where are the bond vigilantes???

Gotta hand it to the Bernanke Fed.

$14 trillion and about $50 trillion off balance sheet and people from around the world are still clamoring for our debt, and big guns like China still only hold about 1.8% of its reserves in gold and is in no real hurry to buy any more of it at $1,525.

Tue, 05/24/2011 - 17:51 | 1306859 kito
kito's picture

lets not forgets spain's bond sale going off without a hitch. a country that is buried in debt, has unemployment in the 20 pct range, has banks that are hollow, and nobody gives a crap. 

Tue, 05/24/2011 - 15:03 | 1306155 Doyle Hargraves
Doyle Hargraves's picture

Bond Vigilantes?! They sold off their crap for PMs and commodities a long time ago. That's the thing, no one with any sense has any US bonds. Do you think anyone who wants to at least protect their purchasing power wants something yielding less than inflation? The bond vigilantes wrote this off as a lost cause long ago. Unless China is a bond vigilante, there will be no massive selloff. Everyone will tumble to the grave with US Bond.

Tue, 05/24/2011 - 15:03 | 1306233 Whatta
Whatta's picture anybody out there in ZH land.

When we were on a gold standard, or silver standard....was there an actual coverage of gold in storage for every paper piece of currency printed? Or was that a fractional thing like todays banking?

I found some old US $2 Silver Certificates in my coin collection when I was scouting out my silver position a while back and it got me to thinking about that, and I don't know the answer...

Tue, 05/24/2011 - 15:06 | 1306256 TheTmfreak
TheTmfreak's picture

If i'm not mistaken, (feel free to correct me like I know people will) gold was redeemable. However, the rate at which the amount of gold that could be redeemed for cash changed. Thats why I don't fully support (or understand) a paper currency backed by gold if they can just change how many ounces of gold per dollar. You could wake up one day and all of a sudden the amount of gold you can redeem has completely changed (for the worse). I guess a gold standard would make the inflation process harder...

I assume this is the case because its not like inflation didn't exist before the gold standard was removed...

Tue, 05/24/2011 - 15:58 | 1306460 RockyRacoon
RockyRacoon's picture

Gold and silver certificates could be redeemed up until 1933 by presenting them at the "gold window" of any Federal Reserve Bank branch, not just any bank.   Here is more:

Tue, 05/24/2011 - 15:11 | 1306262 Doyle Hargraves
Doyle Hargraves's picture

As far as I know, before the Fed it was 100%. You could exchange your silver/gold certificates for the equivalant in metal at any time at any bank. Then when FDR took everyones gold he gave them $20 in Fed reserve notes, and after confiscation, revalued gold to $35 and went to a fractional system. In 1971 Nixon cut the last tie to gold by closing the gold window (international debt/deficits were settled in gold). This meant that the dollar was implied as being 'good as gold'. We all know better 40 years down the road. If you have silver certificates they may be worth collectors value but the time to turn them in for actual metal has long passed. That is about as much as I know off the top of my head without actually opening a history book to verify my facts! And also before decoupling from gold, the dollar actually appreciated something like 12% between the end of the war of northern aggression and the introduction of the fed. Inflation was a non existent phenomenon.

Tue, 05/24/2011 - 16:11 | 1306508 huckman
huckman's picture

"an undefunding in retirement funds"  That was perpectly vague.  Which retirement funds is he referring too?

Good shape. 


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