Dealers Bid Up $32 Billion 3 Year Auction In Advance Of Flipping It Back To The Fed

Tyler Durden's picture

The Treasury just priced $32 billion in 3 Year bonds (CUSIP QS2) in another "strong" auction which was dominated by Dealers who took down 55.2% of the total amount, as they prepare to flip the bulk of its right back to the Fed, just as in last month's 3 year "strong" auction which as we noted yesterday, saw half of the Dealer takedown flipped to Brian Sack in 3 weeks. The yield dropped to 0.765%, just wide of the When Issued, and the lowest since November 2010, even as the Bid To Cover came at 3.279, a touch weaker than May's 3.289, and the 4th strongest BTC in the history of the auction. Indirects came precisely in line with the LTM average of 35.6%, with the (weak) balance, or 9.2%, going to Directs. The Indirect bid was actually weaker than the take down number
indicated. As Stone McCarthy points out: "the Indirect bid declined to
$17.8 billion this month from $18.9 billion last month That accounted
for 17.0% of the overall bid, compared to a 17.8% average over the prior
year. The Indirect hit ratio was close to average, but the smaller bid
still left Indirect bidders with a slightly below average 35.6% of the
auction." Overall another irrelevant auction as there will be at least 3 Year targeting POMOs before the end of QE2 in 3 weeks, meaning PDs will be able to flip the full amount of the OTR they don't want back to the Fed. When it will get interesting it toward the end of June when the distribution of POMOs across the curve starts getting sparse and then ends on June 30. As usual, look for CUSIP QS3 to be the most monetized CUSIP in the next two 2014-targetting POMOs.

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dogbreath's picture

bB,  sorry this is unrelated but had to post it.

Makes me wonder about humanity and do we deserve to survive.

augie's picture

Psst. Sea turtles is a weak angle, try this.

augie's picture

I think I would make horrible decisions if i listen to music like that.

baby_BLYTHE's picture

seriously? are you talking about violence? cause the dudes in those bands are some of the nicest down to earth people you would ever met. The Fans at the shows, the same. There is respect in the mosh. I have never seen anything worse than a sprained ankle or bloody nose

augie's picture

That was more of a backhanded complement than anything else.

dogbreath's picture

so whats the difference between egg harvesters and ponziistas

TheTmfreak's picture

I guess its a "to each their own" moment. I can't get into this music at all. The drums sound good, particularly the kick, but i'm sure its triggers. This "hardcore" stuff has too much emphasis on rhythm and not enough melody. Also the vocals are meh. Melodic Death Metal and Thrash is where its at.

baby_BLYTHE's picture

Yes, the kick drum is usually 'triggered' in a live setting due to stamina issues mostly. I assure you both those band's individual drummers are perfectly capable play those parts in the studio.

I love melodic metal. In Flames, Soilwork, Opeth, At the Gates, Dream Theater.

Death metal is just my favorite genera

tecno242's picture

if it takes 3 weeks to flip on average.. and QE2 is ending Jun. 30..

aren't we about to run into a wall here soon where purchased bonds will not be able to be flipped because 3 weeks out Qe2 is over?

sdmjake's picture


like painting the floor by starting at the door. Eventually you find the corner...and then the fun starts.

becky quick and her beautiful mouth's picture

you assume someone is going to be purchasing them. fatal flaw.

Yen Cross's picture

 So you delve into the Z/H library! I'm Impressed.

NotApplicable's picture

Well, they have flipped as soon as settlement day, which I bet will happen again. Besides, who says they have to wait that long? Surely they can trade an IOU before POMO comes to an end, and trade the real thing later.

Better yet, maybe that's how they will continue to do it after QE2 ends, letting the PDs balances build up against their reserves until QE3 (or whatever its called) is official. Then, just like the federal employee pension plan, they will be returned to whole all at once, as the can is successfully kicked one more time.

Then again, who knows. At this point, a false-flag attack seems more likely first.

jus_lite_reading's picture

Hey N/A... I am thinking the same thing about the false flag event BUT now maybe if this is true the earth with do it for them!!

It looks like the sun is going crazy and we are gonna get hammered by some solar rays which could make some earth quakes pop like popcorn!!! WHO KNOWS?!

jus_lite_reading's picture

Shhhhhh! Keep this secret here!!!Why do you think the media ran the story about SOROS dumping gold??? ITS A PSYOP! HES NOT DUMPING GOLD!!! ITS GOING HIGHER!!!


Chump's picture

Yep...but QEIII is coming because...well...because ZH and everyone else says so.

Nevermind the fact that QE2 has failed even before it's finished.  QEIII is coming.  It is.  It's coming.  QEIII is coming.

macholatte's picture

So what kind of money do the Dealers make doing this?

          How is it calculated?

                   Don't the fees for the Dealers get added to the price the Fed pays which gets laid off on the tax payer.  

Isn't this kind of double dealing illegal?

Chump's picture

Isn't this kind of double dealing illegal?

You are so adorable.  I just wanna squeeze you!

plocequ1's picture

The market is up. Must be those CUSIPS. Damn those confounded CUSIPS

Cognitive Dissonance's picture


That chart looks like one of those used to determine if you are color blind. All I see are naked women on a sandy beach. 

Josh Randall's picture

WOW that color scheme is brutal -- is that from the Seinfeld episode where Mr. Pitt is supposed to see a plane or something ?

NotApplicable's picture

I think I'm having a seizure.

Cognitive Dissonance's picture

It's better if you click on it so it fills the entire monitor. Then you can see the sailboats in the background and the mole on that lady's as..................

TheTmfreak's picture

Exactly it must be one of those kind where you look real close then back your head away.

If i'm doing this correctly.... it looks like a long slong in the ass of a tax payer... I'm not sure.


Edit: Nope, I was wrong, its just a dolphin.

Cognitive Dissonance's picture

Yup, that's Flipper in the background racing the sailboats to dry (non liquidity) land. Boy aren't they ever gonna be disappointed. There is no such thing as dry land.

We call him Flipper, Flipper, you'll see him smilin'
Right from the start, he'll play it smart.
Beware of Flipper, Flipper, he's such a lover,
You will discover when he steals your heart!
When you're feelin' sad, when you're feelin' blue,
He'll make you glad, yes, that's what he'll do,
And what he can do you'll never believe,
For he's got tricks up his sleeve!
Beware of Flipper, Flipper, he's such a lover,
You will discover when he steals your heart!

Greater Fool's picture

Everybody gets two when the open bar is about to end....

koot's picture

So Tyler, where will the treasury get the money after this month? 

YesWeKahn's picture

As long as this is still legal, just do it. Free money from the fed.

Franken_Stein's picture


Grüzi mitanand !


Sources say that David Rockefeller is frail and in a wheelchair.

And this year's Bilderberg meeting is taking place in St. Moritz, Switzerland, for 3 days, beginning 06/09/11.


The hotel is Suvretta-Haus.


Everybody who has the time and money should go there and make some nice photographs of our "elite", planning ahead the future for all of us.


What ?

You don't like that idea ?

Now shut up, bend over and grab the ankles.


Uf wiederluge.


magpie's picture

If i hadn't blown up my trading account last week, that would be an excellent proposition. But alas no time to study my act as fawning court jester, uh intelligent journalist.

Cdad's picture

Any minute now, some enterprising BlowHorn [CNBC] individual with a shred of journalistic integrity left in his body will report the slow creep of money moving into fixed income now because the people need to know that the equity dead cat is...not really bouncing, but only is vomiting shares of the underlying into the gaping maws of propped up [and transitory] ETFs.  No one at the BlowHorn would want folks getting bull trapped.

After all, the BlowHorn is always very quick to instruct when money is leaving fixed income so as to help people catch the rising tide of "historically cheap equity valuations."  

Any minute now.  Holding my breath...

ebworthen's picture



The biggest trend I see in the chart is the inversion November 08 - then increasing divergance since - of High Yield (RH Axis, +100) yellow line and Bid to Cover (RH Axis) light blue line.

What does that mean? 


White.Star.Line's picture

These bond sales are like an animal who eats it's own tail.
It may feel nourished for a while, but the infection eventually gets them.

phungus_mungus's picture

Ain't this so beautiful.... its like picking up your hot prom date and finding out her parents have already got her drunk for you! 

Yen Cross's picture

  10's are also up 3bps. Anyone have any thoughts on that one? Dow up 90 and the dxy back under 74! The usd is so pathetic now, that not even 10yr yields can prop the usd/jpy trade! 

LawsofPhysics's picture

Something only the "awake" on ZH can appreciate.  This is the most simplistic illustration of our current crisis that I have found, enjoy.


Yen Cross's picture

 Nice one! Thanks, you made my day.

MrButtoMcFarty's picture

I want that poster sized.


SheepDog-One's picture

Bonds at this point make no sense to me at all, other than a flat out can kicking Ponzi with a disastrous end soon.

Cdad's picture

Money seeking "return of capital" and not concerned with "return on capital."  T-bills have some room to run here...but then become a screaming short when the equity dead cat is discovered to be entirely not bouncy.


Medea's picture

I wish I understood all of this. Posts like these make me feel like I'm staring at shadows in Plato's cave.

gianakt's picture

The best thing for the fed to shock the market would be to stop paying interest on reserves and to raise interest rates by a small amount of a quarter to half a percent interest. This would drive commodity prices down and give the consumer money to spend and stop the wealth transfer to all the commodity producing countries.