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$38 Billion 2 Year Bond Comes At Lowest Ever 2Y Yield On Record Of 0.665%
Even as stocks continue pricing in QE2 (presumably some time in the next 2 years), bonds keep on laughing. The $38 billion in 2 Year Bonds just auctioned off at a 0.665% high yield, the lowest yield for a 2 Year primary issue. The bid to cover came in at 3.33, compared to 3.45 previously, and 3.15 average. Indirect participation plunged to 32.8%, compared to 41.41% previously. As the directs took down "just" 13.5%, the Primary Dealers ended up taking down a majority of the $38 billion bond auction, or 53.7%. The recycling of cheap Fed money has now fully arrived, and with an Discount Window to 2 year arb of 0.4% (0.66% - 0.25%), it shows just how bad things must be for the PDs.
Due to technical challenges we will omit the traditional bond graph that accompanies these posts. We will resume it shortly: don't worry, there are a few trillion more in USTs to be auctioned off before the Fed lets the charade end.
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Went well ackording to CNBC... No...
Everything is always great according to CNBS except for any criticism of the total fraud markets or talk of the 'PPT' which CNBS says is akin to talk of chupacabra.
It's easy to lower the yield when the Fed is the largest bidder:
http://www.gold-eagle.com/editorials_08/willie072210.html
Then there's also the "Household" sector buyers. For instance I look at my own spending. I bought over 100 million in Treasury Debt at the auction. I mean us little people add up, 100 million here, 50 million there...
+1
yeah, it's a good thing you're all buying gold to combat this hyper-inflation problem. Rates like this confirm one of the worst deflationary environments in history. Yikes
The rigged stock market has a long long way to fall off the cliff.
Is that what the rigged bond market is telling you?
that is what laws of reality tell me
I'm not aware of these "laws of reality" are they like physical laws, psychological theorems, or what? All I can say is that according to the credit market, there is a nearly 100% chance of an equity collapse somewhere around the world in the next two years.
How do we know that QE1 ever stopped?
If the PD's take down 19 billion.. can't they just give it right back to the FED in exchange for cash?
Shhhhhhh....your gonna spoil the ending.
Okay. That was funny. Now that the junk button has been set free they could use a funny button with a daily prize for the funniest.
Instead of twenty, fifty is the magic number, now. So, it still hasn't been set free.
Is "junk button" inflation the only inflation the Fed can create?
I am not an economist so remind me what low bond yields signal about stock market again?
signal deflation
Signal BUBBLE
Risk on.
Or if you prefer, risk aversion.
Otherwise known as 'flight to safety'.
Although I don't know how 'safe' safe is 5+ years out which explains the crunch to grab 2 and 3 year debt.
Welcome to Zombieland.
The easiest explanation is that investors would rather throw money into 2 year treasuries yielding only 0.7% or whatever over 2 years.. than invest that money elsewhere..
it means investors are more worried about return OF capital than return ON capital.
....but, since the stocks have also been riding a rocket up, up and away it means this:
Real smart and rich people have figured out away to clone themselves and their networth. One of the pair wants preservation, the other takes risk. If the risk taker drowns they can just reclone.
It also means this: q305urq3=04tjia[egfijq30=49tuq3=0
And sometimes this: q3-04958q23-0=4tuq03gjq43=j
This is what I think too. Even if Bonds end up yielding a negative point or two due to inflation, that is far less than a 25% (or more) drop in equities or other investments.
Then again, do we really know who is buying these T-bills?
Currently, low bond yields are signaling that the stock markets/equities are rigged! But I am not an economist either.
According to ZH, bond auctions are rigged as well. So I don't know what to do with my money!
Timmmaaaaayyyy!
+1
Cuzin Timmay gonna buy us some beer.
two-thirds of a percentage point don't look half bad in a deflationary collapse
If the stock market can remain irrational longer than you can remain solvant, then the bond market can remain logical longer than you can remain delusional.
This is a lesson to the hyperinflationists.
People keep going on and on about the disconnect between bonds and stocks. Correct me if I'm wrong, but aren't the current trends exactly what you'd expect in a liquidity flooded environment- low bond yields and rising stock prices?
At least, up until the point where the currency breaks.
Liquidity flooded? Where? It's trapped.
Look at bonds as a play on anticipated inflation rate respective to their maturity.
If it's trapped, it's trapped in the financial system. In other words, financial institutions (and the Fed) have plenty of liquidity to run up the stock market AND drive down bond yields. They don't have to choose either/or. Meaning inflation expectations AND earnings expectations essentially disconnect from prices in this environment.
Where's the connection between a rising stock market and falling yields? Is there REAL evidence that QE1 is being used for this purpose through the proprietary desks? The low volume ramp days may suggest so but we don't really know.
IMO, bonds are behaving as they should in this liquidity trapped environment. The stock market is also stubbornly doing the same based on previous cycles. I say stubbornly due to the effective 2Q sideways moves.
Pushing the stock market higher doesn't do the banks a whole lot of good when people are still out of work and not paying their loans. Playing games with themselves to drive the prices higher won't help unless J6P comes out to play and buys from them since they bought at low prices. But J6P can't buy because he doesn't have the money.
Bernanke is caught in a trap. If he inflates but refuses to redirect the inflated dollars to the consumer, nothing ever improves. If he redirects those dollars to consumers in the form of wage increases, then the banks he is protecting lose big time. So instead he is trying to inflate just enough to stave off deflation and hope that a miracle occurs to restore the consumer's buying power.
But there's no miracle coming. The consumers are broke, which means the banks are broke. The only remaining piece of this puzzle is widespread recognition that everyone is basically broke and the debts cannot be repaid at a value anywhere near where they were borrowed. That recognition will happen eventually but because it's human herd mentality at work, you can't predict it with any accuracy at all. Eventually the dam breaks and then the stampede comes but whether it comes tomorrow, or in 6 months, or in 6 years, no one really can say.
Agreed, though Benny can't directly influence wages. I'd simply add that part of his game is to keep rates low to allow for maximum refis by all parties -- consumer, corporations, states, US govt -- to gradually lower default risk.
I just think it'll translate to a very long period (20 years +) of very low growth, with lots of social unhappiness along the way.
Agree with most of this, but Ben is trying to deflate just enough to keep the banks afloat and some semblance of austerity churning. He cannot and/or will not meaningfully inflate the credit bubble (that was what TARP told us... it was a confirmation run). This is presently a controlled demolition, not construction. The banks are range bound, deflate or inflate too quickly and they are fucked (get empty pockets or get paid with monopoly money). So, given Ben can't/won't meaninfully inflate, we're left with one choice.
Right. I don't mean that he's trying to inflate as in raise prices or wages. I mean that he's trying to use his monetary tools to offset deflation so we have either a net zero or slightly positive appearance of growth. And no, he doesn't have a direct way to send money to J6P but I'm pretty sure he understands that part of the problem.
And your other comment I also agree with - this is a controlled demolition. The banks got burned badly in the late 70s by inflation and loans that were repaid in much lower value dollars. Bernanke is not there to protect the consumer. He's there to protect the banks. His best approach then is to find a way, any way at all, to recapitalize the banks while gently deflating, leading to the banks holding most of the real assets at the end of this. Then when growth finally resumes, they are in a position to sell off those same assets and finally actually make some money. It's not the optimum scenario but it is one that both allows the banks to survive and later make some profit.
The outcome of that though is probably as you said, years of low or no growth (like Japan), until both the banks and the consumers are ready again to lend and borrow. Unfortunately I have my personal doubts about
You should have your doubts... because it's not going to work...
i filled 2 metal garbage cans with food after reading ZH months ago. Bought silver too. Prepared in every way for the fall....that hasnt come and i am beginning to doubt that it ever well. I am an ordinary J6P who learned a little bit. Knowledge is dangerous. i also have less than ten bucks in the bank and closed my business. Things have slowed down so much it seemed pointless to pretend to be in business any longer.
So how much longer till it caves
How much longer till silver goes up?
How can it be stopped when there is no law?
Maybe i should just dump the food, get in the can, close the lid.
Burned out waiting for the fall.
Anybody, please, how much longer can this go on? Frustrated and broke in Oregon
Hello! hello? Can you hear me ?
Please direct such questions to the man behind the curtain.
Ben...oh Ben..... We have some questions for you...
my 2 cents it's gonna be a grind for a while dude - is complete collapse in the cards? dunno - my guess possible but not likely - never hurts to be prepared in any event - barring some crazy shit jumping off, our best hope (imho) is the lefties getting tossed out on their ass in November, and hopefully getting some sort of fiscal and regulatory sanity gaining traction in Washington
Wait.
That election wasn't cancelled yet?
You are following common sense and taking a sobering view of your observations.
You are doing the right thing.
No one can give you a timeline. I would guess by the end of November..
Well now you have plenty of spam to eat with your silver spoon. Quite an ironic situation you have yourself in.
Why do I get the feeling you are cheering for a collapse?
Cheering, no. I am an honest man still to this day. I have NEVER over charged a client and that was easy as i undervalued myself my entire life due to low selfesteem. I know who and what i am and have a spiritual connection that has certainty and reality . That is my great treasure, the knowing and understanding of my self.
There was a time we knew going to shool would improve our future and we had a fair idea of what the future would hold. We expected to leave the house or business to our children and we expected to live off our savings as we aged. A farmer plows and seeds with the expectation of a fall harvest.
All that and more is now gone. There is nothing but uncertainty in our future and no solid footing beneath us. Yet we must choose a direction and go or stand still.
I see the material world as illusion to begin with. Now the government hes placed some big lies across the populace leaving us in something akin to the twilight zone.
Nice chatting with you all, gone to the garden to restore the peace in my heart
I think alot of us feel the same way, Mere. I am also trying to position myself for the "collapse" so that I can protect my family and what little assets I have. I love this website and I just try to learn as much as I can from fellow ZH'ers. Much of the information is over my head and I can tell a lot of the guys that post on this site are unbelievably knowledgeable about finance and the stock market, so I just piggyback on and try to pick up as much as I can. I get frustrated with QE1/QE2 because it is a scam. People with inside information know when it starts and stops and can position there investments accordingly. Yet, we know the entire economy is on its heels and so we invest based on solid data that is available to the public, but, we seem to lose. We lose again when our own taxdollar money goes to these already wealth individuals as interest free and then they use these dollars against us by propping up the market, or high credit card rates...(Correction: it is not even our tax dollars, it is nobody's money printed out of thin air). Anyway, that's my beef. Accurate or not. BTW, I gave you a hard time no too long ago on one of your posts. Please accept my apologies.
Im right with you doing the same things, but the only thing I can say that may help is that I sleep ALOT better knowing that I am hoping for the best and preparing for the worst. You cannot quit living though, get employed, be constructive, what ever you must do. If things get better, well thank God! And on we will go, but if not, well I have what I need and I can pray for those who are not ready. Besides, If I'm going to be wrong, this would be the one thing that I hope I am wrong about. Eventually I'm afraid we will be right, so prepare as best you can and enjoy EVERY day, week, month and hopefully years that are relatively normal. Enjoy your family, friends, neibors and what ever you do, get some good sleep, and keep praying we were just wrong. Remember though, it took along time to get this big as a country, it may take a bubble or two more to take it down. It wont get easier, but Im hoping my youngest will be able to hold his own by then.
btw, We have a great tomato patch at our house :-)
As one who has often been accused by friends of "cheering for a collapse," I offer this perspective. First, wishful thinking will not prevent a collapse (though collective sentiment can delay its recognition of inevitability). Not only is it not productive, the required self-delusion is harmful to one's ability to reason, ultimately increasing the damage.
So what is the alternative other than to recognize and prepare for the inevitable reckoning day? Not much short of suicide, which I'll count out as a viable long-term option.
Thing is though, constant vigilance is tough, especially when you're having to do it in absence of community support, being seen as a heretic (if seen at all, that is). This stress internalizes as cognitive dissonance, where the logic of reality fails to match up with the beliefs of the herds, with both the observed and believed realities clamoring for relief from the contradiction of their mutual incoherence. This stress, like all others, demands relief.
I ask though, other than the inevitable collapse, where can true relief be found? Certainly not in the other side, as those are the false beliefs that engendered the disaster in the first place. Any relief it generates is only further temporary self-delusion.
So what appears to be "cheering for disaster" is really only desiring to return to coherence, where observations and beliefs more closely match. Because until that happens, no true solutions to the problems can emerge.
Suicide?!?!? This shit ain't worth killing yourself over! Nothing is. Look at it as a great adventure we are about to embark on. It's part of the journey of life. Live it!!!
These thought projections are obviously, IMO, a state of mind with a reference point back to when things were perceived "better" to the individual. It also goes to say that when/if the situation deteriorates towards the point of total collapse, the reference point, if allowed to adjust or mature, always seem less worse and the degree of hopelessness and fear remain relatively the same, even though the situation has deteriorated. BUT if the reference point is not adjusted eg. reminiscing on how good things were as a child or before the bust or before the job loss, the situation compounds and stress levels stretch beyond reason leading some to have those suicidal tendencies.
My point is this. A deteriorating situation does not help you and in many cases it's better to be wrong than right. You can prepare yourself for the worst, but always hope for the best.
I disagree Ozz. People are making real life decisions right now. This is not just about the stock market. This is about job security, personal debt, family business and things like "Do I re-finance?, Do I buy new equipment for my business or will prices go down or will business decline and render my investment useless?, do I buy a car or if the economy really goes down and I lose my job will I lose it?, Do I open a second business location? Do I hire or wait". Deflation will have a big effect on your balance sheet. Preparation for something that all the objective data is telling us is NOT cheering for a collapse.
You have nothing to lose if you are already broke -- it is the guys with wealth to lose who should be losing sleep.
and the peeps on a fixed income..
I believe something will happen, but I don't know when, how, or what the outcome will look like. It's impossible to predict the desperation of the elites, PTB's and their actions in the final throws of things. IMHO, all you can do is prepare physically and mentally, and then once that's done you can be free to live your life outside of the constructs of the debt-driven slavery of the current eCONomy. But, without feeling superior or more knowledgable than others, since they will not likely want to hear about the imminent collapse of all that they believe in. You can't cower waiting for it, just prepare, and then live each day on different terms. Perhaps that's the way it is supposed to be anyway? Oh, and realize that it won't be fair, none of it will be fair.
MH,
This site is good, but early, which is what makes it good.
Be open to the possibility that what we are witnessing is an earthquake, but not the big one.
Consider that what is happening in Greece -- soaring yields, fiscal austerity, monetary uncertainty, and social unrest (which for Greece isn't necessarily a novel occurrence) -- might need to happen in the UK or France or Japan or even China before it happens in the US.
Could we reach a new equilibrium, however uneasy, that lasts for several years before the final blow-up?
As bad as things are, I'm not sure they are as bad as they were in the late 70's.
So sit back, be patient, and stay alert and flexible. In other words...
Gold/Treasuries, bitches!
hey Bonesetter, I really did believe it would all fall this year and made many decisions based on that assumption. Surely i am not the only small business to do so. as i am a tradesman and still have my tools,truck and trailer i can indeed regain my license. But as a matter of ethics, as a business i participate in the ponzi automatically as soon as i charge a client in dollars. Further if i earn i must pay taxes and again i would be helping an illegitemate beast. I refuse to feed the IMF, Rothchild and the jewish cabal now in power. Obama is not even on my list. He is a pawn doing as told. Patently obvious to a moron like me. I feel sorry for him. He is hostage to power and circumstance. If he did right he would go the way of Kennedy, by bullet.
To add to my dismay the eastern half of this great nation must endure many seasons of poison rain. At some point average folk will wake up as all things green turn brown around them. That is happening and being reported in several states in the south. I am in Oregon, a beautiful state that i expect will see many refugees. My quest here is to search for direction for the material life and give small vent to my frustration with the level of dishonesty impressed upon the masses.
chemtrails have resumed, reports are trickling in. Poisoned water, poisoned air, food aint so great either. Yes i want it all to fall, so we dont get poisoned anymore, no more Haarp, no more lies on tv, no more flouride in the water. no more our boys dying for bigboy profit, no more fast(crap) food.
Yeah man, i could go for that
There are lots of barter sites where you can trade services with people. Sure taxes are due, but the payment of taxes doesn't in and of itself mean you are complicit in the corruption.
Don't get blinded by the Wall Street, political, cabal, IMF, Obama, stuff. Stay focused on the immediate surroundings. You and I have no control nor influence on all that extraneous stuff. Neighborhood, family, client, and personal situations should take precedence at the present time. Note that I don't come from some higher plane than you. I was raised on a farm as a kid, lived in a house in a pasture with an out house until the age of 9. Yes, and I walked 3 miles to school. All true and well remembered. I don't live hand to mouth right now but it's not a too distant memory. Hang in there and localize your efforts. The trash cans will come in handy.
"Hello! hello? Can you hear me ?"
Yes, you're coming in loud and clear. I've often wondered myself. I heard that 2013 is the magic number as an unusually large amout of debt is coming due AND China's real estate bubble will have been pricked by then.
It will happen of that I'm sure, probably later rather than sooner. But that should just give you more time to buy Gold and Silver at cheap prices with an over-valued currency!
I'm a firm believer in Murphy's Law: If it CAN go wrong it WILL go wrong.
There are so many things that could go wrong and the probability of us avoiding ALL of them is virtually NIL.
Shit, I've been waiting since the dot-com crash. I watched the Fed's first liquidity experiment with disgust as half the world went bananas buying houses. Then I watched the crash with momentary relief only to watch in horror as QE1 changed all the rules and bailed out the guys responsible. Now I'm ready for one more push up (QE2) which could add a few years to the wait.
That the crash is coming is for sure... but this year, or 5 years from now.. or even 10... It's all possible. (Cautiously) carry on. Timing the market is a fool's errand.
Put your emphasis on creating the rise of a better system and culture, rather than focusing on waiting for the "fall." We all know the old system of debt-fueled materialist consumerism is over. Keep gardening; value time with family and friends; learn new skills that produce and are of social value.
People who buy insurance must be able to afford it. It's only insurance, not food, after all.
Or a rich child (or Uncle) who will take care of you . . .
FED BUYING ONE WAY OR ANOTHER
Do you really think the Umpa Lumpas running the HFT Pump machine really give a fuck about Bonds and the Bond Market? I can see them now. Bonds? Bonds? We don't need no stinking Bonds.
This is what happens when the people bow down to the elites.
If the Fed's numbers look good, and you're eating dog food, they're happy.
If more people get laid off to keep a 70% "beat rate" on the S&P, they're happy.
When they start to cut the benefits they promised you through medicare and social security, they'll be happy.
The discussion here has been as if QE2 is a certain thing. Forgive my ignorance: what will the Fed buy in QE2? Can't be MBS unless the Fed wants 100% of the US house liabilities. Would it be long Treasury? That's too apparent as a direct monetization to "fool" the mass. Or maybe they will buy up all the gold out there with printed money?
Thomas Jefferson probably put it best, but really, they will buy EVERY thing to prop up perceived value, they cannot let things deflate or the banks go underwater, as well as tax revenues will fall off a cliff and collapse the political system, which they are relying on. Gold and silver, which is in direct competition with the usd, they will try to dismiss or devalue as always. As of right now, they are looking fairly successful but markets are darn big and usually win, we will see.
2 yrs at .665%?? WTF.
May as well fuckin smoke it
33 Liberty is really trying to keept he S&P above the 200DMA.
anyone else notice that they announced the 4-week tbills at 11:00am EST and then auctioned off at 11:30am EST...
11:00am EST:
CUSIP: 912795U82
Term and Type: 4-Week Bill
Offering Amount: $31,000,000,000
Auction Date: 07/27/2010
Issue Date: 07/29/2010
Maturity Date: 08/26/2010
11:30am EST:
Term: 4-Week
High Rate: 0.155%
Investment Rate*: 0.157%
Price: $99.987944
Allotted at High: 7.43%
Total Tendered**: $139,388,171
Total Accepted**: $36,938,044
Issue Date: 07/29/2010
Maturity Date: 08/26/2010
CUSIP: 912795U82
When Treasury cash flow gets squeezed I would expect some of this behavior towards month end. SOMA should be at least 20%. In the future I would expect SOMA in this quick churn to steadily increase.
I have talked about this before on ZH. Running huge deficits posses a unique cash flow problem for the Treasury, and my feeling is they do not know how to anticipate its effects due to when the costs are incurred (legislation) relative to monthly receipts.
Ideally the borrowing has to lead the spending with some surplus to prevent end of month shortages which are not allowed for manditory programs. So how does Treasury adjust outflows towards month end if you are short? You must turn the debt quickly, or perhaps better described as a panic auction.
Mark Beck
How often does this occur? Have you seen panic auctions such as this become more common as of lately?