Putting Today's Record 30 Year Direct Take Down In Perspective

Tyler Durden's picture

The chart below demonstrates how something is very busted when it comes to bond auctions recently. We have previously discussed the ever increasing proportion of Direct take downs in the short-end. Today, we saw a record explosion in the Direct take down for the longest bond purchasable. Just who are the Direct bidders? Whose orders are they executing? Are these merely a proxy for China or the Fed? What happens when that "mysterious" demand disappears? Nobody knows. Which is why Rick Santelli called this a failed auction.

All this is accompanied by a collapse in the Indirect bid (think foreign buyers) to the lowest levels since November of 2008. China is finally coming through on its Bond boycott promises.

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Rainman's picture

The Chinese smoke you smell may well be a fire.

Daedal's picture

What happens when that "mysterious" demand disappears? Nobody knows.

Higher Interest rates would be my guess. Or a forced market correction to help build demand.

bugs_'s picture

Chinese smoke!!

BlackBeard's picture

It's probably fake smoke!

aswipe's picture

A war with Iran might come in handy.

Mr Lennon Hendrix's picture

This is amazing.  It is finally happening....

JimboJammer's picture

What  does  all  this  mean..?   I  don't  understand bonds..

dark pools of soros's picture

a rep from JPMorgan will be calling you soon

Anonymous's picture

It means S&P will jump 20 points.

Anonymous's picture

Ahh Ok thanks Leo!

Anonymous's picture

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Anonymous's picture

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Frank Owen's picture

I think you missed an 'r' there.. should be Cretin...cretin [?kr?t?n]n
1. (Medicine / Pathology) a person afflicted with cretinism: a mentally retarded dwarf with wide-set eyes, a broad flat nose, and protruding tongue
2. a person considered to be extremely stupid

Cognitive Dissonance's picture

Whoops, who screwed up and forgot to bid this time. God Damn it flunkies, put down those bonus checks and Ferrari brochures and pay attention to your terminals.

God, you just can buy good crooks these days, even with million dollar kickbacks.

Anonymous's picture

If the PDs were angry at a 17% Direct takedown of 10s, they must be pissing blood this afternoon.

Yophat's picture

Shouldn't the legend for the black line on the 2nd chart be "in-direct bids"?

Anonymous's picture

That was my thought.

Thomas's picture

That was my thought.

bad.bank's picture
bad.bank (not verified) Yophat Feb 11, 2010 4:02 PM

Good Articles: http://www.iamned.com

We think we can just print our way out of this mess

Anonymous's picture

The direct bidder has to be a the Fed or a proxy working under a guarantee. I used to think it was the Chinese but after that stunt we pulled with the Dali Lama and Taiwan there is no way they increased participation on the long bond, ergo, it has to be the Fed or a proxy. IMHO

Rainman's picture

Mr. Lama visits the White House next week.

Chinese get funny about humiliation....real or perceived.

carbonmutant's picture

I have this weird feeling that Hillary's fingerprints are all over this... esp. since she's in charge of this relationship.

Anonymous's picture

well don't worry our beloved government has a back up plan for our debt. http://www.youtube.com/watch?v=TRgRz3nSG7o

jkruffin's picture

Well, we know it aint PIMCO's Bill Gross,  maybe its Lord Abbott?  LOL   No one in US wants these crappy yields anymore, that is plainly visible.

Anonymous's picture

Remember the good 'ol days when we worried about balance of trade deficits? This was years ago when we actually produced something and exported, (before out sourcing.) Now we just worry about who is and isn't acquiring worthless paper, and how.

Instant Karma's picture

I don't know much about the fixed income markets but....lots of news about the Chinese dumping any US bonds without explicit US Government guarantees. So, wouldn't that lead them into the Treasury market while they were exiting the Muni and Corporate markets?

Shameful's picture

There are other assets they could be moving into. That and remember would you announce your exact action before you made a major trade on it? I'm not saying the Chinese aren't reducing their expose on US debt (I really don't know, I don't have an inside track) I'm just saying there might be some bluff and lies involved.

Anonymous's picture

They could have went into PM
Au up $22 today to 1092.
Ag up $.45 to $15.61
Dollar up at the same time...

Anonymous's picture

They also could have gone...

texpat's picture

Don't worry. The delinquent Fannie and Freddie notes being monetized will provide adequate long liquidity over the next few months.

lizzy36's picture

Yep, probably close to $200b of liquidity. Interesting that this will be done by the 1st week of March.  Just in time liquidity (the type bernanke likes best).

lsbumblebee's picture

Hey who cares? Stocks are up.

CONners's picture

"The chart below demonstrates how something is very busted..."

I usually like her if she is "very busted."

Anonymous's picture

I still can't see what the problem is with direct/indirect bidders. As US imports drop the amount of dollars foreigners get from us will decline so they'll have less to buy Treasuries with. Those dollars will stay in the US (i.e. will not be spent on Chinese stuff) and will be used to buy UST directly.

In other words, we go from this:

US consumer -> China -> UST,

to this:

US consumer -> UST.

US trade deficit shrank by $150 billion and internal savings rate shot up from 0% to 5%, and will likely climb higher.

So, it's mathematically inevitable that foreign purchases will decline.

Anonymous's picture

Do not forget that all efforts towards paying down personal debt count towards the mythical "savings rate".

Anonymous's picture

Right, US Consumers buy Treasuries just as soon as they are no longer unemployed.

Actionpoint's picture
Actionpoint (not verified) Feb 11, 2010 2:14 PM

<a href="http://stockmarket-news.weebly.com/" target="blank">What if We Held an Auction and No One Came?</a></p>

straightershooter's picture

A speculation:

The mystery direct bidder is Treasury itself. The idea may have come from the treasury stock: Buy back (take it off the market) whatever you can't sell and call that a success.

carbonmutant's picture

Actually that's one of the reasons we want to audit the FED.

They may be responsible for some of the buying.

Shocker's picture

The question is when and if we audit the fed, Will we see Books #1 or #2

DaveyJones's picture

sometimes I get jealous. It would be so much easier if we didn't have to hide our dictatorship and state run economy

Anonymous's picture

Shhh. I'm trying to watch this gripping nature documentary attempting to capture an epic struggle between the forces of deflation and dilution. However, there seems to be some biologist interfering and skewing Mother Nature's tendencies.

Classic heavy meddle.

Leadership. Morals. What's my cut?

AnonymousMonetarist's picture

Sovereign risk 'whack-a-mole' puts a bid in the dollar creating a selling opportunity for dollar-denominated assets.

The Chinese eyeing an economic downturn see the unification card as a good option for 'diversion'.

Ma's setbacks, as well as military sales to Taiwann, threaten that option.

Franron robbing Peter (buying deliquent) to pay Paul (to obviate guarantees) doesn't pack the 'monetization' punch needed to offset the selling.

So after some combination of Spain, Finland, Sweden, Norway, Portugal, France, Austria, Denmark, Belgium, Netherlands, UK & Switzerland, undergo their bear raids and the long term dollar swoon continues who exactly will buy our Treasuries? 

Beuller? ... Beuller?

Flight of the arrow baby.

 

 

 

 

 

indyamericanblog's picture

Interesting points, but can you make them a little clearer? 

 

Flight of the arrow???