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$39 Billion 5 Year Auction Closes At 2.494% High Yield, 2.51 Bid-To-Cover
Market reaction: muted to negative. Is China expected to buy all bonds in perpetuity, even as the Fed phases QE out.
- Yield 2.494% vs. Exp. 2.509%
- Bid-to-cover 2.51 vs. Avg. 2.21 (Prev. 1.92)
- Indirects 56.4% vs. Avg 34.6% (Prev 37%)
- Indirect bid-to-cover 1.31x
- Allotted at high 16.55% (BBG)
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So Indirect Bidders (FCB's) are responsible for buying up 56% of this batch.
How long can this go on and what the hell happens when it finally stops?
The thesis from: http://www.chrismartenson.com/blog/shell-game-how-federal-reserve-moneti...
Federal Reserve prints (lots of) money to buy
US agency debt from Foreign Central Banks
+
Foreign Central banks use the very same
money to buy (lots of) US govt. debt
=> Federal Reserve prints (lots of) money to buy
(lots of) US Govt. debt.
A shell game
That looks about exactly correct. I'm sure the MBS purchases are also made from the primary dealers also, transfer the garbage to the taxpayer, buy treasuries, and equities to keep the market afloat.
Fireworks when this all goes pear-shaped!
Thanks for the CM link. It's a really well thought out explanation of why a Fed audit would look really, really bad.
The one thing that I can't make the connection to is the analogy with Zimbabwe. If a small country (any country other than the top 10) fails, the world economy just absorbs it. If the US fails (ie. defaults), then the rest of the world suffers hugely. I can't imagine the other central banks allowing this to happen and thus the shell game may well continue in perpetuity. The one thing political leaders want is stability and they will absolutely do anything and everything to maintain their position. The world will not stand by and let the US go insolvent.
I suppose we will just end up slowly being squeezed to support this scheme and inflation (in the US) is going to become a problem since the dollar can only take so much punishment.
One would suspect that as long as the cash-for-Agency/MBS program is running, the indirect bid will be there.
I used to think deals like this were a layup. An easy flip or rent out with instant positive cash flow. I'm so glad the pesimist in me said it's going lower..... You gotta feel bad (with a smirk on face) for the sap who bought at 1mmgood articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
A possibility is that, once the Fed's Treasury portion of the QE program winds down to it's conclusion in October, the banks will come riding in on a white horse and use those excess reserves currently parked at the Fed to purchase at auction, covering the slack.
Then again, since these institutions could hardly be considered patriotic in nature (unless you think a tapeworm could be considered a fantastic benefactor to it's host), I rather should dismiss this possibility.
More likely, the yield demanded for investing in Treasuries will increase, causing a minor concern at an auction or two, a crisis of confidence in equity valuations will ensue, driving money from the riskier assets into Treasuries.
Will the banks supply the valuation flooring when the Fed exits so that the thus far realized gains can be suspended? We shall see . . .
Or they could just make them buy the treasuries, and the next bailout will be to print the money to cover their losses on that position
One attraction could be Motown and a ride on the assembly line.
They have these open air parks
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
Can we read anything into the direct and indirect bidder numbers? Hasn't the fed been buying some of the paper back from the dealers just 4 days later?
Not a sarcastic comment but an actual observation.... Is it the case that the MORE treasury debt that is offered it seems like we have GREATER bid to covers and better indirect bidding?
Is that even possible?
Exactly how far through the looking glass are we going here?
The looking glass is muddy, we don't really know who the indirect bidders are. It's our bond sales, we are entitled to know who is buying our paper. Are they worried about "stigma"?
Perhaps it's a corollary to The New Geither Rule.
"
When Geithner is again pressed on the issue, he makes the stunning assertion that conducting an audit of the Federal Reserve—something never before done in its 96 year history—is a "line that we don't want to cross," proclaiming that such a move would be "problematic for the country." Watch the interview in the player below:
"
I know this was already posted.
http://www.corbettreport.com/articles/20090825_geithner_audit.htm
Pete
id like to know who the final buyer of the paper is, who ends up with it all. but i think we already know....
mr mugabee
Without a doubt the Fed is driving a lot of this demand, but there may be some legimate demand from people who are wary/not participating in the stock rally.
There has to be at least some "flight to safety" demand as people doubt this market. And it may spike in the short term if equities really tank.
The thesis from: http://www.chrismartenson.com/blog/shell-game-how-federal-reserve-moneti...
Federal Reserve prints money to
buy agency debt from Foreign Central Banks
+
Central banks use this very same money to buy
US Govt. debt
=> Federal Reserve prints money to buy US Govt. debt
I wonder if China has Taiwan on layaway and is making payments.
Not likely, China will have Taiwan for free. They talk to each other warmly, lately.
You know all that poppy growing in Afghanistan? It's paying for those bonds.
Just kidding. Maybe.
No doubt. Remember BCCI?
http://ftp.fas.org/irp/congress/1992_rpt/bcci/
No, everybody forgets that. Never happened.
Hey, how about overlaying all the major US military deployments with all the oil and drugs in the world. TA-DA!
The thesis from: http://www.chrismartenson.com/blog/shell-game-how-federal-reserve-moneti...
Federal Reserve prints money to buy (lots
of) US agency debt from Foreign Central Banks
+
Foreign Central Banks use this very same
money to buy (lots of) US Govt. debt
==> Federal Reserve printing (lots of) money to
buy (lots of) US Govt. debt
Indirects also include the street. They changed this a while back (most likely to confuse us). The street owns this auction and will cough it up to the Fed within the next 30 days..............maybe even before settlement.
Tyler, don know if you saw this http://money.cnn.com/2009/08/26/markets/thebuzz/index.htm
Apparently, theft is the highest form of flattering. You do a helluva job man; but protect you intellectual property so things like these don't occur.
What the fuck!
Funny, I say that every day I look at this market.
--You took those well chosen words right out of my mouth.
I see it now: ZH works are brazenly ripped off in the hopes of pressuring someone into filing a suit (and thus dropping anonymity).
At least they are covering it... after ZH. 2 points from the manifesto:
- to liberate oppressed knowledge.
- to facilitate information's unending quest for freedom.
Success.
somethuign wrong with the picture
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
Maybe Paul La Monica is Tyler Durden!!!
I just want to get the ultra-sensitive "Who is TD?" people fired up again...
Where's Tyler's version of that article? I'm curious to compare them. (And where's the damn search function for the Zero Hedge site?)
http://www.zerohedge.com/article/five-financial-stocks-dominating-market-volume
Actually, I feel bad for Ben, who must buy for what Tim issues. I also feel bad for Tim, who must issue for what Mr.Obama wants.
It's probably not the worst crap Ben has (illegally) been buying.
There is, evidently, no limit to the depth of the hole into which we're going to be allowed to dig ourselves.
Swell.
No, no, we're digging up now.
It really doesn't matter who delivers the bad news Cheeky, as long as it gets delivered. You can be damn sure this wouldn't hit the MSM radar if ZH wasn't talking about it first.
I suppose we will just end up slowly being squeezed to support this scheme and inflation (in the US) is going to become a problem since the dollar can only take so much punishment.good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
Greenspan came away from that meeting unconvinced, believing that one can only clean up after