This page has been archived and commenting is disabled.

Funds Offloading Duration In $50 Million Bond BWIC; Are Inflation Concerns Affecting Liquidity In Long-Maturity IG Bond Market?

Tyler Durden's picture




 

In an odd development, today bond traders have been fielding calls to express an interest in a $50 million bond BWIC. Two observations: traditionally any recent BWICs percolating have usually involved loans, and typically in the form of much larger baskets. This one, however, is all bonds, consists of 17 names, the largest of which are UPS, DIAG, TGT, HARVRD and PEP, and even more interesting is that this is for the most part 2030 and longer-maturing paper. It appears some fund has decided to unwind a big portion of its duration exposure. Granted, the bonds are mostly IG, with the biggest coupon at 7.9%, but nonetheless, the fact that $50 million in HY can not be placed in the traditional bond pipeline speaks volumes about the lack of liquidity in the bond market, especially for longer-dated, and thus inflation sensitive paper. As for stocks, it is very obvious that any liquidity in equities has long gone, as stocks undergo 0.5% rallies in the span of seconds, on no news, just momentum-driven HFT block order frontrunning. 

Full BWIC below:

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mon, 07/19/2010 - 14:25 | 477247 Turd Ferguson
Turd Ferguson's picture

Hmmm, something tells me that I won't see this reported on CNBS. Thanks TD!

Mon, 07/19/2010 - 14:58 | 477300 ATG
ATG's picture

Ditto TD.

Big4 short Ultra Bond contract (>25 years duration) for some time...

Mon, 07/19/2010 - 14:38 | 477261 Goldenballs
Goldenballs's picture

A sniff of something is in the air,but what ...... ?

Mon, 07/19/2010 - 14:41 | 477273 AccreditedEYE
AccreditedEYE's picture

you smell the massive amounts of deleveraging coming down the pipe. Gotta go, it's almost "magic hour"!  

Mon, 07/19/2010 - 14:48 | 477279 Goldenballs
Goldenballs's picture

Shift the rubbish off your books and onto somebody elses garbage heap and get some liquidity in.D-day is coming (deleveraging day)

Mon, 07/19/2010 - 14:40 | 477266 Ragnarok
Ragnarok's picture

Someone else has no inflation concerns, PHYS -4% today on heavy volume.

Mon, 07/19/2010 - 14:42 | 477270 JLee2027
JLee2027's picture

Are mere million dollar bonds still of interest?  I thought if it didn't have that B word, well it's chump change.

Might be a trial run of some kind.

Mon, 07/19/2010 - 14:42 | 477274 bigdumbnugly
bigdumbnugly's picture

tf

i know you are into the metals to some level at least and if i remember correctly some mining stocks too.

i've been trying to weigh the piles of turd (nothing personal - i mean information) affecting the PM sector over the last two months and have officially determined i apparently don't know up from down anymore.  or is it just a matter of if that market can be manipulated it will be.  what's your take?

Mon, 07/19/2010 - 15:09 | 477319 Panafrican Funk...
Panafrican Funktron Robot's picture

"if that market can be manipulated it will be."

This, hence the emphasis on physical, which tends to fluctuate far less.  It will fall during deleveraging, but not nearly as much as equities.  Reference the last crash for verification of this.  If you're in equities at all specific to PM's, I'd suggest positions in mining companies that also do uranium, as that gives you an energy play as well.  If you're rich enough to afford positions in privately-held mining companies, all the better.

Mon, 07/19/2010 - 15:15 | 477329 Turd Ferguson
Turd Ferguson's picture

Big...: Please keep in mind that this is my opinion, based upon years of gold market participation and observation. I could be wrong.

 

What many people fail to grasp is the absolute importance of the gold market. Most US investors oversimplistically see it as a "barbarous relic". Believe me, to the central banks of the world, it is not.

We are rapidly approaching the end on the great Keynesian experiment. The reason we have TARP and stimulus and QE, etc is that politicians and Fed officials are doing everything in their power to extend the game, even if it is just for months, weeks or days. The economy is stagnant so government revenues are also stagnant, yet government spending keeps rising. To that end, the final breaking point is the level of interest rates. What is the current percentage of our national debt that is in 2 year maturities or less? 50%? If rates go higher, the debt becomes unmanageable and the whole thing begins to rapidly spiral out of control. More debt must be issued to service the existing debt yet this new debt is issued at higher and higher rates. This is why the myth of deflation must be perpetuated by the Fed and their accomplices in the media. Inflation means higher rates and higher rates accelerate the death spiral of Keynesianism.

OK, so what does this have to do with gold? Gold is money. Always has been. Always will be. More importantly, it is money that can not be devalued by Central Banks. Because of this, it is the true arbiter of value and inflation in our current environment. Therefore, gold cannot be allowed to freely trade and reflect its true value. If it were to trade to $2000 or $3000 or $5000, the implications would be obvious to all. This would awaken everyone to the reality of lack of faith in fiat money. The issuers of fiat money would be forced to finance their debts at higher interest rates to attract buyers. Again, higher rates end the game.

So, gold must be managed/manipulated. It cannot be suppressed because true suppression would blow their cover. It can, however, be manipulated to control the ascent. That is what the Fed is attempting to do through their minions at JPM et al. This is why gold takes "the escalator up but the elevator down". True demand slowly lifts the price. Manipulation panics the price sharply lower.

Do not try to trade gold. You will only get your ass kicked. Trust me.

Buy gold. Take delivery. Keep it in a safe place.

As an example, I give you the last 12 months of price action. If you bought and held physical, you've seen your gold appreciate over 25%. No worries. If you've been trading paper or options or shares, the whipsaw action has probably wiped you out.

In the end, keep the faith. Gold is headed much higher, of that you can be sure. The top-callers and chart-readers will consistently try to convince you otherwise. Use your brains and don't fall for their nonsense. You and your family will be rewarded in the end.

Mon, 07/19/2010 - 15:36 | 477382 Janice
Janice's picture

Big,

I agree with the Turd :)

There are several books on the subject, "The Creature from Jekyll Island: A Second Look at the Federal Reserve," "The Collapse of the Dollar and How to Profit from It," and "How to Prosper During the Coming Bad Years in the 21st Century."  However, Turd puts it succinctly without the Amazon price tag. 

I don't know if we are headed for hyperinflation, but I'm not going to risk sticking my head in the sand.  Along the way, I may make a good return.  If not, at least I have a shiny coin and the hope that someday it will rise again. 

When Wall Street & the FEDs steal my stock profits, all I have is a depleted account....in the case of Enron, WorldCom and Global Crossing, I get to watch the CEOs (wives) make off with the money while the company files bankruptcy.  What the hell? A company pays NO DIVIDENDS, but the CEO is rolling and takes it to the bank? 

I'll take my chances on the world's oldest currency.  

Mon, 07/19/2010 - 15:59 | 477436 bigdumbnugly
bigdumbnugly's picture

thanks, both.

tf - "politicians and Fed officials are doing everything in their power to extend the game..." 

exactly.  but i am beginning to think there is no end to this extension.  they're enjoying pushing it in deeper every day.   and if and when the jig is finally up, remember that rules are made to be broken - for the ptb.

i used to trade in and out of slv, don't anymore but did well when i was.  i don't now because the market isn't making sense.  still holding some physical now but mostly silver, some gold.

pf - the miners.  the ones i am in are silver mostly, zinc and some other industrials, which hasn't helped.  could use a turnaround soon, they've been taking a hit despite decent earnings.  tks again both.

 

 

Mon, 07/19/2010 - 18:09 | 477686 Turd Ferguson
Turd Ferguson's picture

Just one other thing, Big. 

The end is near for the "extend and pretend" crowd. They can fiddle around and fool some of the people, some of the time, but, like the law of gravity, the laws of economics will eventually win out. Of this, you can be certain.

Mon, 07/19/2010 - 14:46 | 477277 Iam_Silverman
Iam_Silverman's picture

I guess the real measure of the worth of this offering is to see how PimCo reacts to it.  That basket of bonds looks similar to what the stable value fund in my 401K would snap up!

Mon, 07/19/2010 - 14:54 | 477289 DosZap
DosZap's picture

Iam,

Your still in a 401k?.

You are one risk taking dudeski, or lady.

Mon, 07/19/2010 - 20:30 | 477877 Iam_Silverman
Iam_Silverman's picture

"Your still in a 401k?."

Yes.  But I have managed it closely, and haven't taken quite the beating other have.  Back in the old days, the company I worked for matched in stock.  Once a year I would take out all of the company match and roll it into an IRA CD (FDIC guaranteed).  Everything else was in the most conservative offering in the plan (PimCo and Stable Value).  Once things started falling apart in mid-2007 (by my perception) I went all in to stable value.  Over the "big tumble" I only lost about $18!  I warned all of my co-workers, but they just rolled their eyes.  They stuck to the mantra about how the stock market would return steady yields in excess of 7% and - well, you know the drivel they are programmed to spout.  They thought that I was crazy to be in such a pedestrian investment.  I explained to them that I am a saver - not a gambler (investor).  I consider the fact that my employer matches 75 cents to the dollar to be a return on my money.  If I "only" made 4% from stable value, then, in my eyes, I was actually getting a 79% return for my pre-tax commitment.  That seemed good enough for me.

Now I am wondering if I will see a change to the way the company matches in my 401K.  We were being matched with TXU stock, then cash after the KKR/TPG buyout.  Now that KKR is listed on the big board, I wonder if EFH will start matching with KKR stock now?  Hope not.

Any way, I am not ready to take the tax hit just yet.  I keep the company match all cleared out about quarterly for now, and have my fingers crossed that we make it through this bump.  Planned retirement in 7 years.

Mon, 07/19/2010 - 15:04 | 477306 ATG
ATG's picture

Love seeing that Citi ad on ZH.

Just bot some C puts on rumour Paulsen

buying C and calls...

Mon, 07/19/2010 - 15:07 | 477316 Noah Vail
Noah Vail's picture

Gold is going to be in for some very hard times when the next round of deleveraging takes place. Does anyone here really believe the Fed going forth with another money flood guaranteed to wreck the dollar and debt sales? I have a hard time believing they could be that stupid . . . . but then, they've proved me wrong before.

Mon, 07/19/2010 - 15:10 | 477320 GoinFawr
GoinFawr's picture

If you've been proven wrong before doesn't that mean that the dollar has already been 'wrecked'?

Mon, 07/19/2010 - 15:26 | 477355 Panafrican Funk...
Panafrican Funktron Robot's picture

The discussion concerning whether QE2 should occur assumes that QE1 ever stopped.

http://research.stlouisfed.org/fred2/series/CURRNS?cid=25

Pretty sure it never stopped in the first place. 

http://research.stlouisfed.org/fred2/series/MULT?cid=25

This is the reason why they push QE, because up until very recently, it resulted in a money multiplier greater than 1.  Unfortunately, lately, that multiplier has been less than 1.  This isn't supposed to happen according to most modelling methods, which of course indicates that the models supplied to the talking head PhD economists so they could sound all smart and stuff and justify the policy are actually totally bunk.  Eventually this will be realized, about 3-4 years too late to do anything about it. 

And yes, they're going to continue, because there is no other play for them than QE.

Mon, 07/19/2010 - 15:45 | 477404 qussl3
qussl3's picture

Last thing the world needs is a QE2 sized LTCM.

Bloody PhDs.

Mon, 07/19/2010 - 15:17 | 477335 TooBearish
TooBearish's picture

QE2 starts 8/27 for Demoncratic come back in Nov!

Mon, 07/19/2010 - 15:27 | 477358 trav7777
trav7777's picture

like duh...just swap this shit to the Fed!

Mon, 07/19/2010 - 15:58 | 477432 spekulatn
spekulatn's picture

Swap bitchez!

;>

Mon, 07/19/2010 - 15:47 | 477407 RoloTomassi
RoloTomassi's picture

i might be missing something - but whats the significance of this BWIC? they happen all the time.....

Mon, 07/19/2010 - 15:52 | 477420 MasterBeta
MasterBeta's picture

Not to sound ignorant but what does BWIC and IG stand for?

Mon, 07/19/2010 - 16:19 | 477480 Iam_Silverman
Iam_Silverman's picture

IG = "It's Good", or is that Investment Grade?  Either way, I'm sure it is all very subjective - but that is why we have those very trustworthy rating agencies, right?

Mon, 07/19/2010 - 17:20 | 477621 MasterBeta
MasterBeta's picture

Ha you would think so.  Thanks for responding

Mon, 07/19/2010 - 20:34 | 477887 Iam_Silverman
Iam_Silverman's picture

As for the BWIC part, I still don't exactly understand this part:

Bid Wanted In Competition - BWIC What Does Bid Wanted In Competition - BWIC Mean?
A situation where an institutional investor submits its bond bid list to various securities dealers. In a bid-wanted-in-competition situation, the dealers are allowed to make bids on the listed securities. The dealers with the highest bids are then contacted.  Investopedia explains Bid Wanted In Competition - BWIC
This approach works best on more-liquid securities. For situations where less-liquid bonds are involved, an investor uses a dealer similarly to a broker. An order with a predefined spread range is submitted to a dealer, and it is up to the dealer to fill that order within a limited timespan. I guess that those bonds are considered to be pretty liquid, even though they seem to be pretty long-term?
Mon, 07/19/2010 - 16:38 | 477531 Goldenballs
Goldenballs's picture

Can,t help thinking with everything thats going on in the markets,etc, that the powers that be appear to be like Generals in World War One and that as they become more desperate the problems multiply and fester as they make things worse,sooner or later something is going to give maybe in a small way becoming major and the flows they unleash will destroy the entire system,they refuse to acknowledge that they can ever be wrong.......Even afterwards they will be in total denial.

Tue, 07/20/2010 - 08:52 | 478460 Grand Supercycle
Grand Supercycle's picture

XAUUSD / XAUEUR / XAUAUD bearish warnings issued since July 1 continue . . .

http://stockmarket618.wordpress.com/about

Do NOT follow this link or you will be banned from the site!