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Post QE2 Direct Bidder Onslaught Carries 30 Year Auction

Tyler Durden's picture




 

Today's 30 Year auction of $13 billion was a carbon copy of the previous 3 Year and 10 Years both pricing in the last two days. What was so carbony about them? Well, all three came inside the When Issued, with the 30 Year $13 billion reopening pricing at 4.198% 2 bps inside the 4.22% WI, and all three have seen a surge in Direct Bidding take down. Is the Direct Bidder, a category that was redefined back in June 2009 for reasons not exactly known, the "buying force" that is supposed to take over for dropping Indirect Interest? And yes, for a strong auction the 30 Year today saw a decline in foreign bidder participation to just 37.8%, better only than May's 33%, and the second worst in all of 2011. But yes, thanks to the "Directs" coming out of left field and bidding up a whopping 21.9%, compared to 9.3% in the June auction, the Bid To Cover surged to 2.80 from 2.63. One look at the chart below shows that there is a very distinct correlation between the take down of Direct Bidders and QE: between February and August, or the period between QE1 and QE2, the average Direct Bid was 22.3%, while during QE periods this number gets cut in half. We doubt Directs are merely indirect proxies for China, but like everything else having to do with the riskless basis of Treasury auctions, the actual source remains shrouded in secrecy, and only after the collapse of the Treserve ponzi do we hope to discover just who and how makes up this category. One thing is certain: we are 100% confident Direct Bidders will make up a major portion of all auction across the curve until the onset of QE3.

Is there a pattern here?

 

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Thu, 07/14/2011 - 13:22 | 1456658 fuu
fuu's picture

Someone needs to investigate whether buyer demand is being over stated.

Thu, 07/14/2011 - 13:25 | 1456666 Alcoholic Nativ...
Alcoholic Native American's picture

Save us anonymous billionaires!  All hail our saviors,  who not only do us the favor of buying our treasuries but also shower us with trickle down and jobs.

Thu, 07/14/2011 - 13:25 | 1456670 The Continental
The Continental's picture

How do we know that the direct bidders aren't agents of the Fed monetizing debt?  I don't trust the Fed as far as I can throw them.

Thu, 07/14/2011 - 18:45 | 1457856 TheWord
TheWord's picture

I'd imagine that there are a few Euro banks getting the hell outta there.  Switzerland is getting mighty crowded and expensive.  US bond market looking very attractive.  Remember how Benny extended Euro swap lines on 29 June?

http://uk.reuters.com/article/2011/06/29/uk-usa-fed-ecb-swap-idUKTRE75S2...

 

Thu, 07/14/2011 - 13:25 | 1456673 oogs66
oogs66's picture

maybe people are worried we won't be able to issue treasuries for awhile?  or they know Greece is about to default?

Thu, 07/14/2011 - 13:27 | 1456674 White.Star.Line
White.Star.Line's picture

Every layoff, loan default, and foreclosure increases the trickle of water flowing beneath the foundation of bonds.

Unless we count the marshmallow filling being injected by the FED and Treasury.

Thu, 07/14/2011 - 13:28 | 1456685 NotApplicable
NotApplicable's picture

Why surely it's all of the mom & pop households seeking a safe haven, right?

Thu, 07/14/2011 - 13:30 | 1456690 TruthInSunshine
TruthInSunshine's picture

Direct bidders are probably Japanese Housewives.

Unless Bloomberg News, LLP files a FOIA lawsuit against The Bernank & Jeetner, that's my story and I'm sticking to it.

Thu, 07/14/2011 - 13:33 | 1456700 Problem Is
Problem Is's picture

"Is the Direct Bidder, a category that was redefined back in June 2009 for reasons not exactly known, the "buying force" that is supposed to take over for dropping Indirect Interest?


...the actual source remains shrouded in secrecy..."

The Source of the Direct Bidder Funds
The Bernank has more cash stuffed in the walls all over the place than...
Whitey Bulger...

Thu, 07/14/2011 - 13:35 | 1456711 lolmao500
lolmao500's picture

Direct bidders : FED off balance money sent overseas to the ECB/UK central bank buying up US bonds.

Thu, 07/14/2011 - 13:35 | 1456715 carbonmutant
carbonmutant's picture

Who are the Direct Bidders?

Revealing this should be a prerequisite for Bernanke's replacement.

Thu, 07/14/2011 - 13:37 | 1456725 the not so migh...
the not so mighty maximiza's picture

if they told ya they would have to kill ya.

Thu, 07/14/2011 - 13:37 | 1456719 TooBearish
TooBearish's picture

Rumored budget deal for ...wait for it...1.5 trilion in cuts...in the year 2525

Thu, 07/14/2011 - 16:33 | 1457416 Prof Gulliver
Prof Gulliver's picture

... if man is still alive, If woman can survive, They may find ...

Thu, 07/14/2011 - 13:37 | 1456726 zorba THE GREEK
zorba THE GREEK's picture

 Failure of a treasury auction would be a catastrophe causing rates to skyrocket which would

 bring Ponzi to abrupt end. Therefore, no auction will be allowed to fail no matter what has to

 be done. We are dealing with desperation here. You cannot rule any action out.

 

 

Thu, 07/14/2011 - 13:41 | 1456755 HpDeskjet
HpDeskjet's picture

Why is it so hard for most people here to see that treasuries are (relatively) a good investment at this point.

 

Stocks: Margins have peaked, sales growth won't be great

Commodities: With the developing world hiking rates as mad men and the developed world imposing austerity measures, they won't do well

High Yield/Emerging Market Debt: Spreads bottomed out and are widening, lack of liquidity will make this trend continue

Thu, 07/14/2011 - 14:20 | 1456922 narnia
narnia's picture
You really believe this ponzi scheme is going to survive long enough to pay off that 30 year?   Everyone playing this worthless US Treasury debt game long term is going to end up with a bullet.  I choose not to play Russian Roulette.  
Thu, 07/14/2011 - 14:41 | 1457052 HpDeskjet
HpDeskjet's picture

Who forces you to hold for 30 years? I think that inflation has peaked in the developed countries (including US). Unless the macro-economic numbers start to improve solidly over the next few months, it is quite certain that both inflation/growth will be (very) low. In such an environment bonds are fine.

Thu, 07/14/2011 - 14:57 | 1457122 narnia
narnia's picture

Engaging in the trade of worthless stuff is a game (hence, why I called it a game).

Currency velocity & wage growth are not the only two things that cause inflation...  so does increasing the supply of currency.  There's no potential outcome for the US that avoids inflation of the $.      

Thu, 07/14/2011 - 13:45 | 1456779 oldman
oldman's picture

It is becoming more obvious that there is no one home.

Algo-master just makes this shit up out of nothing.

Who believes any of this is real?

Can we be that blind?

And, oh yeah, I'm losing it this morning---but I'm not going over the edge with the rest of the lemmings; I'm going to just sit here and laugh.

Better a loon than a lemming----------for now.  

Thu, 07/14/2011 - 14:24 | 1456939 RiskAverseAlertBlog
RiskAverseAlertBlog's picture

Identifying the "who" is all well and good, but the "why" is more revealing. Hyperinflationary QE, being a put under risk assets, at least during its early phase, has met its limit in a dearth of available fakes meeting the ratings agencies secret wink test. So, now, having become widely recognized-counterproductive, QE's absence leaves just one alternative: Glass-Steagall. Thus the bid under long-dated Treasuries. The crew giving DSK and Mr. Murdock a wild ride these days can't be hurting matters, either.

Thu, 07/14/2011 - 14:30 | 1456970 narnia
narnia's picture

the problem is not the lack of regulation of the fractional banking system, it is the existence of the fractional banking system.

Thu, 07/14/2011 - 14:25 | 1456942 janus
janus's picture

Mr. Durden,

If ever you're troubled by thoughts like, 'i wonder if The People get it...do they know how special this is.  I mean, people like me have a far more fascinating intenal dialog than almost anything they can offer; and I labor long, day and night (literally), to open a shaft of light in their otherwise gray little lives...', well, if you are so troubled, don't look to me to cheer you up; the answer is, probably not.  Most are feckless imbeciles, blind little moles caught in a clay seam; but you seem to have gathered about you a pretty good sort of people, and so by ZH my cynicism is some what attenuated.

I would, however, like to see the percentages of use viz. this site and the attendant rates of donation.  In other words, any of you sorry-sacks-of-shit who use this site and do not likewise support it should be tarred and feathered and mocked by ginger-headed school children, sorry lil' bitchez!

now is the time for all good men to come to the aid of their party (donate! -- one lunch; that's it -- 10 wittle dollars; do it NOW),

Janus

Thu, 07/14/2011 - 16:47 | 1457421 Youri Carma
Youri Carma's picture

"Direct Bidder, a category that was redefined back in June 2009 for reasons not exactly known". Well we can guess.

Hedgefunds operating from the Cayman Islands working for the central banksters in return for inside info and printed up money to buy up the goat shit of course.

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