This page has been archived and commenting is disabled.
Investors In Yesterday's 2 Year Bond Auction Get Piledriven
Remember yesterday's 2 Year which closed at 1.000% and everyone was so happy? Oops. One short day later and the bond has hit 1.11%, leading to "massive" (not our word) losses for all those who bought on expectations that the 2 year part of the curve would be subsumed by the Fed's "near term" part of the window. Not happening. The weakness from today's 5 year as well as various other factors have contributed to one of the biggest broad curve sell offs so far in 2010. With about a trillion in issuance still to come in the near future, things are only going to get uglier.
And courtesy of a bond trader, here is a list of some of the key talking point that have credit traders abuzz. In a normal world, the credit weakness would be spilling over in stocks. Luckily, these days very few people (computers is a different story) care about stocks.
- Hedge funds were betting heavily that 10-year swaps spreads would not continue to narrow and in some cases they even "doubled down" on that bet. Hence they finally had to throw in the towel and cover these bad positions;
- Because people worry about higher Treasury yields and new issuance that just keeps on coming, people continued to receive in swaps Wednesday as opposed to buying cash Treasuries;
- Because of reason #2, some actually turned to selling of 10-year Treasuries on Wednesday and that had not been seen in any size on Tuesday;
- There was heavy unwinding of flattening trades as those trades began to go against traders;
- Because of the Fed's involvement in the mortgage-backed securities market over the last year, convexity hedging via paying in swaps is no longer a factor. In fact, there is evidence of mortgage accounts being forced to receive in 5-year and 10-year swaps on Wednesday;
- Because OTC swaps are an off-balance sheet item, they are being used instead of cash and that seems to be intensifying as the end of the first quarter draws very near;
- In the sudden sellfoff in cash Treasuries Wednesday, technical triggers were hit in cash and futures and that caused selling by commodities trading accounts better known as CTAs. As far as Treasury futures are concerned, seasonals are bearish for 10-yr futures prices from late March to mid June;
Look for much more weakness in the upcoming auctions, as the Fed's window of curve fudging slowly disappears (more on this in the next post).
»
- 7274 reads
- Printer-friendly version
- Send to friend
- advertisements -
Sounds like a 'no bid' situation coming up shortly.....
Not if the PD's/Fed keep buying to the bitter end - in which case a dollar collapse is more likely.
Piledriven....LMAO.
Best headline writers in the world at ZH.
Look for "body slam" for a headline, soon!
Skull poppin'
http://www.youtube.com/watch?v=_IAWl6bXElg&feature=related
Dirty Sanchezed-
Oral Roberts'd
Cleveland Steamered
Snowplowed.
Ben-Bernanked
Phucknutted
lol, winner winner chicken dinner
ROFL!
Keep it going folks.
http://www.youtube.com/watch?v=zzHgjua6LOo
"looks like he's taking the skin boat to tuna town!"
Flailing away in tweaker town ..
Searching for our lost generational wealth ..
Some people claim that there is a CDS trader to blame, but I know..
No leading institution will flame
Ding ding ding, DH....you are the winner of a brand new phucknutted, piledriven, reverse-alzheimers Greenspan doll.
Some restrictions apply. Ages 6-100 only.
The fuzzy blowtorch. . .
Cornholed!
Art Gar-funkled.
Blankfeined, Buffetted, Dimonolished, Macked.
Dimonolished...brilliant. This will definitely become one for a future story. Damn you are good.
Corn-holioed....heh heh heh heh
The flock continues to get fleeced, oh wait, this is a different flock.
The remaining sheep in this flock are looking for an exit. It's shearing season and I suspect a few throats will be cut along with the wool.
Um mm, lamp chops tonight!
Nice one. Did something snap there?
www.youtube.com/watch?v=vzZvBSyxhLE
Yeah, stocks don't worry BAC is up.......on loan mod story. Ummm, haven't they gone well.
if this doesnt freak the "hey the Fed will just keep propping asset prices up until its all better" crowd, i dunno what will
Americans are down on the economy and the markets even as stocks and growth indicators are up.
By an almost 2-to-1 margin Americans believe the economy has worsened rather than improved during the past year, according to a Bloomberg National Poll conducted March 19-22.
Among those who own stocks, bonds or mutual funds, only three of 10 people say the value of their portfolio has risen since a year ago.
During that period, a bull market has driven up the benchmark Standard & Poor’s 500 Index more than 73 percent since its low on March 9, 2009.
“Economists look at their indicators and the American people see indicators in their everyday life,” she says. “It is hard to argue with what people observe in their own communities.”
The poll also finds that Americans remain skeptical about the health-care overhaul even after the U.S. House passed the legislation March 21, with fewer than 40 percent of respondents saying they favor the plan. While most say the government should play a role in ensuring everyone has access to affordable care, a majority say health care is a private matter and consider the new rules approved by Congress to be a government takeover.
Wrong Track
A sense of despair pervades perceptions of the economy and nation. Barely one-in-three Americans say the country is on the right track. Fewer than one in 10 say they believe the economy will be strong again within a year. Just 4 percent of Americans who cut back on spending during the recession now say they are confident enough to open their wallets, according to the poll, which has a margin of error of plus or minus 3.1 percentage points.
".....the 1 in 3 that think the economy is on the "right track" picked the winner of last season's American Idol, and are looking forward to the new season of Kardashians...."
Aw, I call BS on that! Everyone knows Adam Lambert should have won last year.
It's sort of like a knitted sweater or blanket that gets a pull or a snag. It can stay that way for a long, long time - even with continued injury. But once it starts to unravel, it unravels very, very quickly with nary any reason for such damage.
This "economy" is starting to feel like oh so many sweaters I've long-since put to pasture.
2010 is a repeat of 2008. Buckle up, gonna be bumpy...
Except its going to be worse.
+1000
Sideways or meltup until after the election, don't underestimate their ability to manipulate the markets long enough to get what they want.
Hooboy...looking toward this holiday season with some sense of dread.
If the FED/govt had infinite power to manipulate the markets, the Bush/Cheney/Paulson team wouldn't have let the 2008 meltdown happen. Eventually reality rears its ugly head, no matter how hard the extend-and-pretend crowd try to avoid it.
Is it bad for 2-year yield to move that much in a day?
(giggles quietly)
It's about goddamn time - and worse. Die, US bond market, DIE!
Nah, buy some more! You can always average down.
Hahahahahaha!!! Brilliant. You are not a UBS Financial Advisor are you?
Classic ZH!
It's happening folks. The bond market is cracking. Sitting in ANYTHING except Gold is insanity at this point IMHO. Don't cry for the like of Mish/Prechter who will most likely commit suicide in the near future.
Why Mish?
I understand the reference to Prechter.
Mish thinks the USD/Bond are going to be just fine for a long time to come.
I dunno know about that long time thing, but the dollar US most likely has one more really good run left it it, if abbreviated. Good to see ya GG
Same here Miles.
Tallest midget in the room.
Yep, Mish is one of those rare "hard money" deflationists. Advocates owning gold, but see continued strength in gov't bonds. Confused fella if you ax me.
I'm with ya, buddy... I just have this suspicion that they will let the 10 year break 4% to bait all the anti-gov types into shorting, and then pull the rug out from under them with the uber risk asset crash (stocks / oil / copper). That should get us back to 3.5% for a few months, and gold will take a little hit (nothing major).
I'm right with you, AR. It's near the end of that little hit that I dump what's left of my soon-to-be-worthless FRNs into shiny stuff - then swim out past the breakers and watch the world die.
Yep, it's a goddamned trap, like everything else on the Street. We watched the ten year flirt with 4% before, didn't we? I'm not trading it, just gonna get longer PMs.
Stocks still acting great amidst, the evolving credit/rate problem, one more time. Please don't tell me it's, MF cash, GOP Election win, HC or "weaker USD (later). This is pure manipulation, plain and simple. Stock response today should have been severe. Nothing normal, I know it's been said a lot but,,,,what the FREK?
Give it a couple of days. End of the quarter coming up, everybody wants to keep the happy face on at least until then.
By then the various Ponzi promoters (CNBC, White House, TBTF Banks, etc) can start talking up earnings season. Around and around she goes, where she stops, nobody knows.
I think it only works as long as the demand for US debt is high enough that the pretense of successful auctions can be maintained. When the cracks start to become obvious to everyone, equities will be sacrificed to the bond market, even if it only buys a little more time.
I don't know if you guys read the death of the dollar series but this is serious shit . Watch Asia and Europe to see how they handle this move . But right now MSM are keeping their mouths shut-
I will bet anything China and Japan show up at the next Auction once rates are up I think they dont want to but will step to the plate becasue they have so much at stake -
China's starting to run out of dollars to recycle (apparently anyway, who knows what the real situation is) and Japan's going to have their hands full supporting their own bond market, won't be able to continue to support the US as well. Game can't continue forever, even if all players want it to.
and gold is doing what today?
Going on sale, apparently.
Hurricanes, tsunamis, earthquakes, and financial collapses bring the best out in people. Too funny!
Piledriven was inadequate. What they got was a Cleveland Steamer! What an ass-whippen'.
that was just a reach-around, the phisting comes later. lulz
Wrist watch. No Crisco
cue Christopher Walken monologue.
In Serious Leather
In Serious Pain
Maybe next time some of the buyers won't be so stupid! Maybe next time they will remember who the sellers were! Maybe next time when they're called upon to pony up to the trough, they'll collectively tell the sellers to F__k off!
Awww. Gotta love the free market capitalism at work here folks
Evil speculators?
Yes.. that's it.. those that speculate as to how markets actually work without attempting to get a clue first ... Candy from a baby
We're really in the twilight zone when everything that's dollar negative in any rational world results in the dollar index climbing, with gold twiddling its thumbs.
Is the emperor stark naked if all his subjects are too?
My beacon's been moved under moon and star
Where am I to go now that I've gone too far?
http://www.youtube.com/watch?v=a1sf2CzEq0w
I get that this post is supposed to have meaning regarding the losses incurred by the investors who purchased these t's recently. But if I understand this situation correctly, taxpayer money is being used to buy all these issues via QE/monetization. As such, virtually unlimited printing by TPTB make these losses insignificant.
Would the editors of ZH consider penning an "Idiot's Guide to Government Debt Issuance" for people like me with an admittedly loose grasp of the mechanics of the bond market? Or point me to a previously posted article? I'm not convinced I've got the nuances sorted out in my head so let me see if I've got this right: Investors have been moving from the long end of the yield curve to the shorter end but even now it's getting harder to attract them away from higher-risk (and thus yield) assets and into government debt, forcing a rise in the treasury coupon rate (the "cracks" in the bond market), making it more expensive and thus harder for the government to service their IOU's with the endgame seeing the US government unable to make its interest payments?
So how's my aim?
I find having wikipedia handy in a tab or adjacent window is always the perfect way to answer your questions. It's not only amazing how much is available and for free on wikipedia, but that it's usually well edited and illustrated.
Let's pray the financial/elite class never get a chance to "improve" it.
"In the sudden sellfoff in cash Treasuries Wednesday, technical triggers were hit in cash and futures and that caused selling by commodities trading accounts better known as CTAs."
Pardon the possibly ignortant question, but would this be a large part of why Au is taking a beating right now?
does this help comex boost inventory, for contracted delivery?
I'm waiting for the new Yocto duration Bill.
ucvhost is a leading web site hosting service provider that is known to provide reliable and affordable hosting packages to customers. The company believes in providing absolute and superior control to the customer as well as complete security and flexibility through its many packages. cheap vps Moreover, the company provides technical support as well as customer service 24x7, in order to enable its customers to easily upgrade their software, install it or even solve their problems. ucvhost offers the following different packages to its customers