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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fuu's picture

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

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.

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.

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?


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?

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.

NotApplicable's picture

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

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.

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...

lolmao500's picture

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

carbonmutant's picture

Who are the Direct Bidders?

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

the not so mighty maximiza's picture

if they told ya they would have to kill ya.

TooBearish's picture

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

Prof Gulliver's picture

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

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.



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

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.  
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.

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 $.      

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.  

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.

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.

janus's picture

Mr. Durden,

If ever you're troubled by thoughts like, 'i wonder if The People get 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),


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.