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Horrible 5 Year Auction Sends Treasury Complex Into A Tailspin, 5 Year Yield Surges 22 Bps In Two Days
It has been a long time since we had seen a 5 Year auction as ugly as today's: printing at a 1.615% high yield, the 5 Year had a 3.5 bps tail off the bat to the 1.58% WI where it was trading before. The internals were just as ugly, with the Bid To Cover coming at 2.59 a plunge from May's 3.20, and the lowest since June 2010. Not surprisingly, Indirect interest evaporated once again, tumbling from 47.1% to just 37.6%, with Primary Dealers having to take up more than half, or 52.1%, and the remainder going to Direct Bidders. Too bad they will have no more opportunities to flip these back to the Fed. Which as expected starts to confirm Bill Gross' thesis that in the absence of the Fed monetizing, rates are about to go higher. One look at the second chart shows the relentless selling in bonds since Sunday. And as reported previously, with a barrage of issuance due in the months following the debt ceiling hike, which will probably be some time in July or August, look for the sell UST thesis to start getting its long overdue confirmation. In the meantime, the 5 Year yield has surged from 1.35% yesterday to 1.5727%, a mindnumbing move.
5 Year summary:
UST complex summary:
And... splat:
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Let's see...
No QE = higher rates
Higher rates = death to The Great Ponzi
Death to The Great Ponzi = loss of power for TPTB
Conclusion: QE can't and won't ever end.
And on the other hand, QE cant continue either....the great conundrum. Painted themselves into a corner with La Brea tar.
Stuck betweek a rock and a hard on...
You misspelled "cock".
Not in Hulkville!
Turd has spoken...
In the words of that great contrarian investor Scooby Doo:
More like with napalm.
Nope. Counter-intuitively, the opposite happened in 2010 when QE ended. Rates fell. Check for yourself.
After last week's massive rally, this is a very normal pullback (in prices).
Buy on the dips!
LOL, rates going negative...'thats just normal'...oh ok.
Nobody said negative (unless you're talking about the 30 day bill which just did) on the 5 year. Just closer to ~1.0% before the big reversal, when QE3 gets pre-announced.
Again, study last year's template: the huge move DOWN in rates happened AFTER qe1 ended. QE2 ends in a couple of days.....
The 'template' is 'Get everyone 100% sure there will be never ending QE's, then pull the trap door out from under their sheeple asses'.
Watch and see.
If no QE3 arrives, then all the better for a long trade (NOT buy & hold) in Treasuries.
Without QE3(etc.), what will the sheeple do? Panic.
Where will they run to when they panic?
Short-term Treasuries.
Perhaps. For a very short term hold. Till treassuries perceived "flight to security" status is revealed to be fraudulent. Sometime this winter.
Exactly.
I was short in the fall 2010. There's little doubt that a rally won't last.
But in the meantime, why not grab an opportunity to profit (or avoid losses). If everyone is so bearish here, and risk assets (especially US equities) are still near their recent multi-year highs, then why not gain from what will almost certainly be a flight to safety when the shit hits the fan?
We've seen this movie (clip) before....last summer. We know how it ends.
The script is exactly as you say, except in 2011 it has already played out. Stocks have already corrected to price in QE2's end, and UST have already rallied. There is no "event" that occurs this week. The event has already occurred. To hold the view that the shit hits the fan starting after June 30, you have to believe something changes. It doesn't. The FED will still invest maturities and divs from their total balance sheet. Also, there will be less flipping of UST to the FED. You should use your script and consider a twist: UST just hit their price highs for the year.
I think the flight to safety has been called into question by the utter lack of flight to safety so far in 2011. However, bank recapitalization will force banks to raise capital through debt or equity offerings then lever it up and buy US Treasury securities to meet Basel 3 & D-F tier 1 requirements. But it's still only short term cover for the thieves in Washington.
you are all obsessed over qe3 coming. not coming this year. fed not worried about deflation now. stocks holding their own. kiss fed balance sheet expansion goodbye for a long time.
http://www.reuters.com/article/2011/06/28/usa-fed-fisher-idUSN9E7GO02Q20110628
Brother Dog,
I have a lot of cash sitting in my account. Ummm, tell you what, I'll loan it to you and pay you interest on the loan.
K?
OK brother! Just as soon as I buy me some more LULU and Monster energy drink stocks.
10 YR note up 10 basis points.
I concur, this is what I expect. If rates do go up, they'll come back down again, and then some.
Just for fun I junked myself, too.
And I just junked that, too, and this.
And this.
Junk-ception.
I LOL'd
Turd,
Take this and put it were the Junk don't shine
http://www.youtube.com/watch?v=ZUabDrfjATY
I am now using the <JUNK> button as a thumbs up on a post...
So I <JUNK> you too Turd...
ego-implosion in 5..4..3..2...
SOME trolls are junking the TRUTH!! they HATE Zerohedge and what it stands for because it is exposing the truth!!!!! CROOKED BANKSTERSS!!!!!!!!!!
You might get less junks if you stayed off of the caps lock, and were a littke more restrained with the exclamation points.
Just sayin.
(BTW, I didn't junk you.)
Some sick basturd just likes to junk everyone...... must be BEnron
TURD!!! YES!!! BUT WHAT ABOUT THE THINGS THEY CANT CONTROL??
NEW JERSEY NUCLEAR POWER PLANT IN HOT SHUT DOWN AS COOLING FAILS!!!!!! HOLY SHITTT!!!!!
http://fiatsfire.blogspot.com/2011/06/countdown-tuesday-momentous-vote-to.html
AND PAY PAL CLOSES THEIR MONEY MARKET FUNDS!!! HOLY SHIT!!! TIMES 14 TRILLION!!! BIG NEWS!!!
DAMN thats like 3 or 4 nuclear disasters going on in the US, and all anyone seems to care about is fucking LULU stocks! WTF!
Perhaps, the leotards are isotope resistant?
THIS IS THE REAL PROBLEM!!!
http://theeconomiccollapseblog.com/archives/economic-recovery
ITS BAD!!!!
Reminds me, I need to close out my MMF's and convert before its too late...
yes, reeeeaal lite reading
Paging Mr. Gross, paging Mr. Gross
Are the market chugs higher. I think I'll hang on to my short positions now...next week could be ugly.
Today is all AUM (Assets Under Management). Desks pumping on vapo thin volume to get that one last summer bonus. Then the massive selling post QE2 to get further QE. Thursday's the day.
Yep, I agree that this vapo-rally will end very soon. "Good" news out of Greece could push it a bit higher but in the coming weeks and months it's difficult to see what will impel this market higher. Taking up shorts accordingly and hording cash.
Good luck!
yes next week could get ugly, or the week after that or the week after that. funny thing though, it never seems to happen. still waiting.....
I starting to think this end of POMO thing is going to work out just fine.
Squeeze and dump -- just da boyz doin' their thang.
Come on Robo, I see you junking every post again you little clownfart.
When Austerity hits the US, who will pay Robo to troll this website?
austerity is for masses not likes of Goldman Saks ... :-) ...just for fun ...
and stocks gun higher...
It can't be this simple. It would be the most anticipated trade (sell UST's) ever! Something will happen to change this. If not a QE morph the event can and should be pervasive stock selling. Get the 30 day T-Bill all the way back to 12bps and roll out the asset buying spree, yet again. You should own "more" Gold by then.
we need higher rates on a day when stocks go down to really scare the people. today is just written off to how strong stocks are, particularly on the back of such 'great' caseshiller numbers
Yep and awesome 'consumer confidence' data as well.
Robo stop junking every post and just post one of your trademark clown fart posts yourself.
i thought higher rates were good for the economy? they show economic strength.
ROFL.
No worries.
If the stock market implodes just as everyone here is cheering for, then risk assets will plunge and everyone will flee back into bonds and the U.S. dollar again.
It is a built in put for Bernanke's Perpetual Motion Machine.
I tend to agree with you. When commodities and equities take a dump post-QE, all the anti_USD lemmings will herd right into USDs and Treasuries. It's the second rule of.....club
Yup.
At least somebody "gets it".
and then what? once the "wealth effect" has vanished, spending will further deteriorate, tax revenues will continue to shrink, welfare spending will continue to increase all which will have what affect on Uncle Sam's credit rating?
I thought Uncle Sam's rating is beyond discussion.
(Sigh)... Two casinos linked by a corridor. I can hear the chains being wrapped around the doors from the outside though. Keep your eyes on the exits folks.
Exactly. Everyone assumes theres always a safe orderly exit out the casino doors, no problem....Ive got a strong hunch it will be like The Who concert this time!
And yes I know that was people trampled to death trying to get IN...well you know what I mean.
But don't forget, it's not enough to simply run for the exit. You have to get someone else to sit in your seat (i.e. buy your position). And you probably won't get the price you were hoping for.
He who bolts first, bolts best!!! Door looks mighty small and shrinking.
Bernank is a TOOL, just like you Momofader! I hope the fleeing you do is from mobs of rioters swinging nail bats!
i'm not cheering for a stock market collape but the last time it fell i wwas out of wwork for six months. i figure that if i short the market and it falls then at least i will have something to live on while i'm unemployed but if it doesn't fall then i have lost my savings but still have my job
Provided that someone actually pays on your shorts and the paper you get is not worthless.
that does keep me awake at nights, but i don't have the resoruces to get phisical in a big way
BTW MomoFader you simple-ass bastard no one 'CHEERS' for the markets to implode...simply bright enough to see the innevitable. I know you love your Pigmen and dream of being one, but youll only ever be a Pigman groupie.
The fact that the 5-year yield itself is at 1.571% is mind-numbing.
Even at 2.571% it would still be mind-numbingly low given the necrotic state of the Guvvamint's finances.
Methinks a little perspective is called for.
+1
wake me when it hits 5%
Are you planning to sleep 20+ years?
So... OT2 is a certainty at this point and once the announcement comes it's once & for all.
Rates rising soon? Not on the Bernanks watch.
Look at IYR (some post the daily chart)?
Check out the yank-and-crank buying to keep it up. Two huge buying volumes to literally catapult it higher. They just absolutely can not have it down even one day...at all costs (evidently)
Serious to Christ...this shit has to be just about done.
Now, treasuries shit the bed and the market charges higher?
looks like you didn't BTFD. jeezus some people never learn. don't make it complicated wise guy. over two years and you're still losing money
What is with all this junking? I thought Tyler only allowed grown ups at the site. Kinda like our Congress. Oh never mind. No adults there.
This is working out very well, just taking time.
Its MomoFader, I already caught him doing it on 2 other articles today.
I have been wondering if it is someone who would like to discredit the site and the regular posters. This is a weakness of a site feedback system based upon unenforceable negatives. If this person junks all the old posters new traffice to the site may think that they are not very credible. I would suggest that if this keeps up we might consider nullifying the negative aspect of this system by using it on everyone... constantly, lol. I think the positive feedback system is less exploitable, such as the solution implemented at Turds site, he did a very nice job with that setup.
Why do we even issue bonds, we have a monopoly on our currency, we don't need to sell bonds
why does "three card monte" need three cards?
This is what happens as junk bonds are actually facing an open auction. The Fed withdrawal, as Gross nailed it, will cause a spike across the spectrum of yields above 2 years. They may "want" a steep yield curve but not so steep that it crushes capital investment, which is what will happen.l
Everybody is calling for higher yields...everybody. And didn't yields shoot straight up once QE2 was initiated?
SURE free money is exciting! But....what if thats not the game this time around and theyre just letting all the sheeple chew their cud complacent in the conventional wisdom that Bernank is working in their best interests to make sure theres always more green grass?
I wouldnt count on it!!
what if ... well thats what separates the weak from the strong ...
Or those with common sense from the bull headed.
Commence dumping.
Ah yes, there is a very real cost for creating capital to fund malinvestment, this is but one affect. The turd nails it, either the ponzi dies, or QE continues. No other options. Hedge accordingly.
And if QE continues, the Ponzi also dies.
All the remaining canaries are on life support, soon to be in rigor mortis. Will anyone connect the dots and leave the Extend and Pretend Mine before it is too late?
"Horrible"?, "Ugly"? Beauty is in the eye of the beholder. Finally sanity may be starting to permeate the markets.
They will come up with some bullshit, no one ever heard of . Like pumping salt water on the Fukishima reactors. They know it will fuck the whole system in the long run but who cares about the long run. keep the money pump going no matter what.
Im sure the people on the back of the Titanic also were saying 'Um, it might bob back up dont ya think'?
QE is working! Why stop now? It is working! Raise the debt ceiling! The US will pay it back...eventually..after the DXY whistles one last song. Seriously, you think Bernanke is sweating? Neo-Keynsian theory, what is taught in every Major University across the globe, agrees, more debt issuance will fix the problems. Who cares what the fascist Republicans say? Their only answer is 'Austerity', which is just as stupid, because only the super rich will benefit from that 'solution'.
No one understands the crux of the problem is that FIAT MONEY IS NOT REAL. The system is running on pixie dust and unicorn wings. It is not that the system is no longer functioning- it never did. First World relies on a Third World. This is slavery. Democrats can think they are honorable because they want to issue food stamps, but they wear NKE, they buy APPL products, they promote the slave system. The system is built on Smithsonian economics, and Adam Smith was pro slavery. His theory centers around slavery.
So those that follow this theory are slave masters. Bernanke is a slave master, Obama is a slave master. But slavery is not sustainable. The lower class does rise up. We are seeing that now, but what will they fight for, and who will they fight against? Is the rebellion centered and focused? Will it be? What will we do....how will we find freedom from the system of Smith, the system of slavery?
It is not Keynsian, with more debt issuance with no backing of a real monie. It is not austerity, which will strip all assets away from the people and give the rich all the access to resources and cheap labor. No, it is simply that Constitutional Monie must be confirmed, the Fed must be burned to the ground, and State Banks should hold the collateral. This can happen on a grass roots level if people buy their own gold, silver, and then remember that society is as strong as its weakest link. People who can start their own bank, or loan gold to the banks, will see a return on their money, as the banks use the gold on loan to issue debt. So...buy some silver for the sake of a new system.
LOL! those graphas are pretty steep and % delta-huge all right, but 1.36%? huh? for five years? the peeps who locked that in may have had enuf @ that price. we may have seen a bottom in the 5 years. hammurabi records 1.28% for the 5's back abt 1750 BCE so this would be abt a 4,000-year low.
wait! you want me to loan my money to the USA @ 1.4% for 5 years? now, that's a whole different dealy!
i don't know the future, but for now, the FED seems to be shutting down some of the firehoZes, but not mopping up yet. so, the fire drill continues... i think they want the long end rates to pay more, so the "financial community" can get the rate carry working. after all, that is their business, right? steepen the curve a little, for now.
unfortunately, there is a delicate balance, with more and more hanging in it, the further we progress in the debtifukation of america. house 0'cards; tower of babel; ponzi non interruptus. and, interests in the outcome(s) differ widely.
the internet is pretty cool, really. got PMs?
Dear ZH friends ..... let me present you (trumpets here)
THE ONE AND ONLY - MONETARY ICE AGE
PS
Some limited cash will be available only for those which OBEY
Shiller was dead wrong. He said rates will fall as investors run to treasuries away form the Euro.
Bill Gross is right...he yelled, "stay away from Treasury Bonds...they will tank."
Looks like fewer and fewer want treasuries.
Really? Since Bill Gross said that Treasuries did nothing but rally.. And now they gave back 20% of that rally.. That makes Bill Gross only 20% less wrong
Someone please, please forward the memo to the Russell 2000.
how about 2Y surge: from 0,322 to 0,474 !
in just 2 days.
Of course, just after yields were compressed to issue new notes yesterday
Another dumb comment by ZH.. Let me see, since Bill Gross turned bearish on treasuries 5s rallied 90bps and now they gave 20bps back.. and somehow being 70bps under water rather than 90 vindicates Bill Gross' view..? seriously..!