German 2 Year Auction Fails By 20% Of Notional As Rush From Government Paper Intensifies

Tyler Durden's picture

There is only so long that the Bundesbank can keep ignoring the fact that it has recently started piling on failed auction after failed auction. Today, Germany tried to sell €5 billion in 2 Year 1% Schatz notes. And while the official tally on the auction was a 1.1 Bid To Cover at a 0.92% average yield, just above our own 3 Year auction yesterday, (and a drop from the 1.4 previously) this was yet another failed auction, as the bank managed to get only €4.33 billion in competitive and non-competitive bids. The kicker: the Bundesbank retained €995 million of the issue, a whopping 20% of the proposed issue size - this is the amount it could not find any buyers for, and the deficit to what have been a non-failed auction. In other words, after the entire world was rushing to buy German paper, suddenly there is nobody willing to get in.

More from Market News:

The German federal government sold E4.005 billion of the 1.00%-coupon December 2012 two-year notes (Schatzanweisung) at a minimum price of 100.14 the Bundesbank announced Wednesday.

The weighted average price was 100.167. The average yield on the sale was 0.92%, while the bid-cover ratio (excluding retention) stood at 1.1, lower than the 1.4 b/c at the last 2-year auction on November 11.

One hundred percent of bids at the minimum price were accepted. The Bundesbank retained E995 million (or 17.9%) of the issue for its open market operations, bringing the total tranche to E6 billion, as expected. [ZH: this should say 5]

There were a total of E4.575 billion in bids for today's sale. The bids included E2.325 billion in competitive bids and E2.005 billion in non-competitive bids.

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themosmitsos's picture

This is huge--this is the fourth one.

Cheeky Bastard's picture

You piece of shit :P. I *told* you this 2 hours ago. Now, go link me some music .

themosmitsos's picture

You're a butthole & I'm *not* your monkeyboy! :P LOL

papaswamp's picture

Damn CB...where have you been?

Been watching the Harpex?...coupled with BDI and declining rail and truck traffic...not exactly boding well for the end of Q4 beginning Q1-11.

Popo's picture

The terrifying thing about bondzilla, is just how motherf*cking big he is.

solgundy's picture

sell gold & silver

jesse livermoore's picture

Why would i sell my gold and silver?

mrgneiss's picture

Rising rates will scare weak holders of PM's short term, but it's not like rates will be rising due to sound economic fundamentals, bribing people to buy bonds is more like it.  Dire consequences for sovereign debt payments.  Most will find out the hard way the truisms of Exeter's pyramid, and by then it will be too late.  Go buy some physical on this coming dip.

TheGreatPonzi's picture

Hum... if inflation is coming, bonds rates are supposed to go up, no?

mrgneiss's picture

Yes.......thank you for that revelation...........I was alluding to the fact that in the MSM, which I ignore for the most part of course, anti gold and silver bugs purport that rising rates will choke off the PM bull market with some misinformed comparison to 1980 or the argument that the opportunity cost of holding PM's has just gone up, whereas in fact these are erroneous conclusions.  These people may sell in the short term, the ones that tie rising rates to the end of the PM bull market.  However, I believe that this just heralds more debasement and the advent of hyperinflation, and I will be adding to my stack on any dips or plunges.

TheGreatPonzi's picture

You and I think the same thing, buddy. I was just saying that if bond auctions see higher rates currently, this is bullish for PMs, as there is probably more inflation expectations in these rates than default fears. Both are bullish for PMs.

Concerning central bank rates and PMs, a hike would be bearish for PMs in a normal environment. We are not anymore in a normal environment, and fiat paper will end up in dust anyway, even in the deflation hypothesis. Deflation means world default, and world default means the end of currencies that were backed by the debt that defaulted, just like in Argentina.

Those who pile up dollars instead of PMs have confidence in the government. They believe the government will make everything in its power to preserve the currency, even if it means allowing a systemic default. And even if it doesn't lead to systemic default, gold performs very well in deflation (cf gold stocks in 1929-1935).

tmosley's picture

In a free market, yes.  Not when you have a non-economic actor propping up prices.

Thomas's picture

Rates and gold rose in concert for years during the seventies. They even peaked at about the same time.

TheGreatPonzi's picture

To buy what, cash? Be more precise, please.

papaswamp's picture

Too late now missed the sell opportunity. Just the slow pokes selling now....Silver has already turned around (a rare divergence from gold). Though I suspect there will be one more down turn before another solid run up occurs.

thepigman's picture

Meanwhile the Sackman (or somebody)
got the US 30 year up off the floor in the past few minutes, Tyler. Stay

Moonrajah's picture

Today, Germany tired to sell €5 billion in 2 Year 1% Schatz notes.


Is this a typo or a pun?

doggis's picture

how is it that germany has failed auctions, and yet the USA seemingly has none??? 

LongSoupLine's picture

Because Germany doesn't have a Bernanke and a posse of Primary Dealers to prop the show.

Oh regional Indian's picture

Because Germany is still populated by people, not sheeple and the german government is not yet (please note, not yet) in a position to first covertly and then overtly buy it's own paper.

Add to that, they do not have standing armies and armadas the world over, giving them, shall we say, some leverage in the matter of worthless debt purchase.

There are a few more, but you get the drift.

Bad sign though. 2 years would have been short term paper a year or three ago, not no more. Now, 2 years is 2012 and the return to...something!


snowball777's picture

As a concrete example, consider Japan: they are basically under an umbrella of US protection (like S Korea), dependent on exports to the US (like China), and as fully vested in the Ponzi as the PDs. ==


101 years and counting's picture

easy.  the primary dealers are forced to soak up all the unwanted paper.  thats why there is POMO.  if the pd's had to hold all of this TP (treasury paper or toilet paper?), they wouldnt have any funds for anything else.  the Fed is simply giving them the required funds to continue to buy treasuries...

Dan The Man's picture


I'm not giving up my hoarde for fiat crap...probably ever. 

...from my cold dead hands.

jtmo3's picture

Cause the fed buys all that no one else does.

kgbgirl11's picture

I must be missing something -- was there no bids for the remaining EUR 995bln? Seems surprising, given that average yield came out below nominal and below previous... is the market depth in Bunds so shallow?

Hephasteus's picture

Is this a message to Angela Merkel that they'll punch her in the vagina whenever they feel like it?

Spalding_Smailes's picture

Gold ~ 1385     ~ 1430 24 hours ago.



"Lastly, you must always be vigilant on days like this. We've made new highs on both PMs so, if successfully attacked by the EE, they are both subject to the dreaded "outside reversal day". Again and in short, the ORD is a technical warning where you trade above yesterday's highs but close below yesterday's low. The low on Friday in gold was 1385.30, so it would take some work but never underestimate Blythe and Her Monkeys. She may not try it today as 1385 may be too far away but she'll definitely try her tricks again someday soon. Of that you can be certain." - "Early Monday", 12/6/10  8:20 am EST

Pope Clement's picture

You got that right Judge S. the Turd in his turdness rules...

dehdhed's picture

when i read the blog i feel like a yo-yo sometimes.   it reads more like,  it may go up but be careful it could down too.     and with all the patting on one's back with my prediction this and my prediction that,  has turned into my prophecy this and that.   seems to me that the intent is more to prove what a psychic trader turd has become.   no offense to turd,  he seems like a nice guy,  but since there isn't any email links to send feedback on his blog, i thought i'd post my 2 cents here.


Cdad's picture

Who would have seen this coming?  Bueller....Bueller...

And I remind you all again...of the smarmy criminal Wall Street banker's call yesterday on the CNBC blow horn that 1.33 was "the bottom of value in the Euro [against the dollar]"  It was a call that took four hours to fail. 

Expect 1.30 to break very soon [look at the daily chart], which will cause a massive "risk off" move...after which smarmy criminal Wall Street bankers will talk about how good shopping is, and how great the tax rate extensions are, and how great everything is, pumping fictional future earning projections for S&P companies as they naked short silver, dodge FBI agents and search for other things to arbitrage and destroy with POMO money...which will be followed by our own failed bond auction at noon.

I thought the bailout and enslavement of the Irish would have been great news!

Slash's picture

I posted monday night to be careful as silver rose very quickly. Nothing goes straight up or straight down (except the dollar over the long term.....that just goes straight down).

unky's picture

Of course, they all buy greek and irish and portugiese bonds, since these countries will be bailed out eventually anyway as a new European superstate will be created

Dick Darlington's picture

Just wondering how long will the Germans tolerate the fact that the periphery will bring Germany down with them. All these flawed ideas abt common eurobonds or fiscal union will only mean one thing: every eurocountry will suffer. That kind of solutions will not fix the real underlying problems like competetiveness issues. Getting more debt to get a quickfix on balance sheet problems is just another attempt to delay the pain.

john milton's picture

"germany is a shitty country" famous quote from seppo räty track & field javelin champion..;)))

Pope Clement's picture

Nice job of goading our bosch bros Miltie - We want them at the bankstas throats instead of licking their boots...

BennyBoy's picture

Some EU members and non members are punishing Germany for not following the ECB script.

Perhaps the FED?

unky's picture

The german politicans have to say in the public that they oppose bailout of the PIIGS. Thats how they will get re-elected. There are some state elections upcoming next year.

However since they are all controlled by the same banksters they will agree to bailouts behind closed doors later on anyway.

simonsito's picture

these "failed auctions" were considered as some kind of "testing the waters".... however, that has been after the first and the second attempt... now it gets kind of scary, combined with the pressure from all around Europe to bail everything out until we all go down. Its strange these days to watch things goin on when youre living in Germany. Sad thing is that our media here is mostly blaming the Irish/Greeks for the obvious misery, instead of our very own squid, Deutsche Bank and their to-be-bailed-out counterparties.

dehdhed's picture

what next?  cutoff germany's paypal account?

mark mchugh's picture

I hate to keep pointing this out, but the US Treasury auctions aren't real.

Obviously the Germans have a lot to learn about rigging bond auctions (one of the few things the US still is a world leader in).  Maybe Timmay will teach them.

unky's picture

I think so too,  people in germany actually believe u could get out of ever increasing debt by cut spending.

Better inflate it, like in america. this works without any riots or so

DonutBoy's picture

Wow - doesn't bode well for the Euro-bond.  Up until now the EMU has delivered bund-rates to the PIIGS. If the EMU starts delivering PIIGS rates to Germany, they are going to want out.

CrashisOptimistic's picture

So will the ECB soon be buying German sovereigns?

Has the world gone insane?

westboundnup's picture

Germans will not suffer ECB austerity measures.  They will cut the cord.  That's sanity.  Euro fails and then . . .

LyingDutchMan's picture

I'm sorry, guys, but if they sold 4 billion while the bids were 4.5 billion to me it seems the auction didn't fail. Let alone that on top of the 4 billion for whatever reason they decided to keep 1 billion for their market operation. Or am I thinking wrong?