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5 Year Bond Contagion As German Bobl Auction An Unsubscribed Failure
Following yesterday's very disappointing 5 Year $35 billion auction by the US Treasury, Germany followed up today with its own unsubscribed bond auction failure, after Germany sold just €4.825 billion in 5 year bonds at the 2011 low yield of 2.16%. The problem - the auction remained technically undersubscribed as the €6 billion offer only received €5.445 billion in bids. Even on a sugar coated basis, the BTC was just 1.1, a plunge from the 1.9s seen recently. But such is life without the backstop of Primary Dealers who buy up everything there is, until they themselves are no longer able to flip the shell game. From Dow Jones: "The Bundesbank said all bids at the lowest price were accepted and it satisfied all the non-competitive bids at the weighted average price. The amount retained for market-tending purposes was about EUR1.175 billion, bringing the total issue size to EUR6 billion, as previously announced." Bottom line, with the pristine economy of Germany unable to sell bonds, what does that mean for the US and the rest of the insolvent "developed" world?
Full details:
Issue five-year bobl
Coupon 2.75%
Maturity April 8, 2016
Amount on offer 6 bln
Bids received 5.445 bln
Bids accepted 4.825 bln
Bid-to-cover ratio 1.1 (1.9)
Average yield 2.16% (2.45%)
Average price 102.63 (101.35)
Minimum price 102.60 (101.34)
Settlement date July 1, 2011
And some expert responses to the auction per Reuters:
ALESSANDRO GIANSANTI, RATE STRATEGIST, ING, AMSTERDAM
"It is not so great. In terms of bid-to-cover it was not successful. The five-year had outperformed the 2- and 10-year as the market started to reduce expectations of (European Central Bank interest rate hikes). Yesterday we had a great selloff in the five year because of comments from (ECB President Jean-Claude) Trichet."
"The fact that bid-to-cover was lower is mainly related to the change in sentiment on the periphery and expectations on the Greek vote and because the market starts to reprice interest rates after Trichet's comments."
"Nothing bad for Germany, but the market is starting to become bearish on the five-year."
PETER CHATWELL, RATE STRATEGIST, CREDIT AGRICOLE, CIB
"Obl auction technically uncovered with bids totalling 5.45 billion euros in a 6 billion euro issue. A large tail also. Of course this was difficult paper to sell in a bearish session, but this auction is worse than expected, as was last night's 5-year U.S. Treasury auction. With a longer term view, weak core 5-year auctions are a good indication that the rally in core paper has run its course."
CHIARA CREMONESI, RATES STRATEGIST, UNICREDIT, LONDON
"The auction is technically uncovered...(The bid/cover ratio) is in sharp contrast with the previous trend at the Obl auction, when cover ratio was on average 1.9 times. This might be due to the fact that the 5-year area on the German curve is trading very expensive, and also in absolute yields terms is not very attractive -- lowest yield since the January auction. Even after considering this fact I was still expecting a better result anyway, given that 24 billion euros of redemptions from Germany were also supporting the auction."
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Whoops. I'll speak for Rick Santelli and give that auction an "F"...
The opposite of default contagion is bond auction failure and illiquidity contagion.
Then again the masses have no clue as to what the shadow banking system is doing nor the implosion happening in China on a nightly basis.
The finest of MAD. The fun... THE FUN! Huh Tyler?
As expected, the criminal syndicate will use the circus in Greece as cover for thousands of flash trades, while the reality the market is supposed to be paying attention to, of course, is all the other Euro nations and the signals that their debt markets are sending.
Again, it is only more proof how we no longer have a market, but instead a computer bank controlled by the very circus masters responsible for Greece, and all the other unsustainable debt created all across Europe [and in the US].
We have an electronic Ponzi scheme, not a market. Until such time as our current regime of criminal bankers are removed, there is no reason for capital to form, and as such, our economy is doomed.
Wonder if the market will open to pollies hanging from lamposts lol.
Couldnt happen to a better bunch of folks.
i agree. Take the graft and open oneself to a short drop with a quick stop.
If Germany struggles to raise money one has to wonder if the US could raise anything without the primary dealers?
Seems gold may be upgraded to a Tier 1 asset under Basel in Q3 2011.
http://goldandsilverlinings.com/?p=1348
No he visto en mi vida un mercado financiero que de tanto asco.... VAYA MANIPULACION de ladrones.
Sorry for spanish speaking but i feel between Impotent and frustated..
We all do, friend, that's why we're here...
Used to. Now just eating popcorn, watching the Great Show, and LMFAO. Its that whole 7 stages of rage thingy.
Yeah once you get over the rage thingy then you can just enjoy the show!
http://www.ebaumsworld.com/video/watch/81624083/ ... Monday June 27 2011, A video of the near earth meteor, No worries...The silly litle things that man does.
Now if we can just harness enough ZH psychic energy to direct these objects(?) onto 33 Liberty.....Voila.
Floating rate instruments anyone?
They're all floating, while they make their last few trips around the bowl.
Maybe chinese were so busy buying other crapy bonds elsewhere in EU and just didn't make it ... coudn't come to auction?
;-)
So they accepted all of the bernank's bids then?
note to Governments around the world: SPEND LESS = Borrow Less = Save More
do what "we the people" do and not what you the kleptocrats typically do
sounds about right, lending to Germany is giving 90% to Germany and 10% to PIIGS.
Are the PDs waiting for the US bond auction once the debt ceiling is lifted or has the world run out of money?
Perhaps they should have dropped a press release before the auction that they were rethinking the Basel III capital reductions...
"Another Fine Mess"
"In the last two weeks, financial community sources have suggested to me that conditions are worse than the first story indicated. All new Treasury debt with maturities longer than two years, one said, is being bought by the government itself, meaning the Fed or government controlled trust funds. Average the maturity of all new debt that ends up in non-US government hands is under two years.
One source speculated that the Administration straining every muscle and nerve to keep the extent of market dismay at the U.S. government’s financial condition and expectations of exploding inflation from public view until after the 2012 election. Another suggested that the motive is less political and more fear of the economic and financial market fallout. But obviously these are not either-or motivations."
http://www.hughhewitt.com/blog/g/85e8e56b-8d89-44cb-b484-245946c049ae
The question is: What are you really buying? Are you buying a clean German bond, or whatever insolvent country Germany happens to be backing this week?
Gimme 10% and I'm gonna buying them, 2.75%?
Thanks, keep it.
Oh Eurobond, where art thou Eurobond ?
It's such a small step from no-one wanting to lend to you, to everyone wanting their money back...
US buying its own paper through Social Security is...analogies fail me, but kinda like the Confederacy after 1863. Except they were more honest and printed the money directly.
Cuba the only solvent, sovereign nation on earth.
Looks to me that what will need to happen is that all of the governments will once again have to issue their own free money instead of being dependent upon and paying interest to bankers.
Just let the primary dealers fail and eliminate 90% of all of the malinvestment and fraud that exists globally.
Nah, this just shows how fucked up the financial markets have become. One minute the speculators are gunning for some of the central bank good stuff, then poof! they're running the other way, whichever way the wind is blowing, whichever path the water flows down the hill.
It's all down the hill from here.
It means that debt is worthless and the worse money will chase the worse assets and this ponzi will spiral out of control-- risk assets may be debt this time around that goes down as a result of the end of QE because no way equities could ever go down-- no way to charge higher interest.
If you can lend to the Greeks at 10% or 15% or 20%, with a strong expectation of being repaid by the German taxpayer, why would you lend directly to the Germans at 2.75%? Saving the euro by persistently bailing out the paupers guarantees rapidly rising rates for all European governments. Brilliant move.
Looks more like creating some smoke to cover up US Treasury auction problems.