Recapping Today's Bill Auctions: Direct Bidders Are The New Black
Summarizing the Bill auction in three words: Record Direct Interest.
The most notable feature about today's Bill auctions was the surge in Direct Interest. The $13.3 billion Direct Bid for the 3-month bill was a record. The resulting take down of 17.3% was a major upside from the 3 month Direct Take down average of 7.3%. As noted previously, the Direct Bid came at the expense of a decline in Indirect bids: the Indirect Bid of $10.4 billion was lower than the total Direct bid for the first time in remembered history. At this point indirects are all shifting away from the Fed's methodology and seemingly expressing interest only via the Direct bidding syndicate. The reason for this transfer is still unknown.
The $11.9 billion Direct Bid in the 6 month auction was also a record: the Take Down was a whopping 18.2%, which was still below the all time record 38.7% seen in July 2008. And, as above, the Indirect Bid dropped to the lowest in over ten auctions at just $10.2 billion, once again less than total Direct interest.
Directs are becoming an ever more prevalent, and disruptive, presence in not just Coupon auctions, but now Bills, as well.
(2 votes)
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on Mon, 02/08/2010 - 13:12
#222289
Wow, look at all the comments. Can this be translated out of bond-speak and into Englitch.
on Mon, 02/08/2010 - 13:40
#222321
Try Google. It's how I learned to keep up with "How Things Really Work, but My TV Won't Tell Me..."
Here's a quick primer (from a Google search on "indirect bids"):
http://www.newyorkfed.org/research/current_issues/ci13-1/ci13-1.html
on Mon, 02/08/2010 - 13:58
#222345
I understand your view. However, IMHO the lack of comments here has little to do with the complex subject and more to do with same ole same old. In deference to Zero Hedge, this is not a web site for beginners. Thus it requires beginners to become involved in their own learning process/curve, which really isn't a bad thing.
If ZH approached every article as if it were talking to beginners (and thus spell everything out) it would lose more readership than it would gain. The in-the-know readers come to this web site to get more in-the-know information. They would be driven away if the web site was reduced to remedial hand holding.
Educate yourself and you will learn much faster than if someone does it for you.
on Mon, 02/08/2010 - 14:11
#222359
Here is my translation:
1. The primary dealers are losing some control over the auction pricing, and thus are exposed to greater risk of taking modest losses than was the case in the past.
2. The buyer or buyers of increasing amounts of each auction do not want their identities known to the primary dealers.
Of course, the greater the secrecy of the bidder or bidders, the more we would like to know who it is. But we are confined to making educated guesses.
on Mon, 02/08/2010 - 14:57
#222391
I think the theme ZH is showing us for these auctions is that:
- Direct (anonymous) Bidder takedown has been increasing. (the government is forced to buy more and more each auction)
- Indirect (foreign) Bidder takedown has been decreasing. (nobody wants $ anymore)
This should change though as the RoW embarks on their flight to safety now that everyone else's fiat pieces of paper and digital numbers smell worse than ours. It's really the only option as the Treasury can't just keep continue buying its own treasuries forever, so how else to create genuine interest other than to flush Europe down the toilet?
on Mon, 02/08/2010 - 23:24
#222930
How convenient that GS appears to be well positioned with it's finger on the flusher:
http://www.zerohedge.com/article/ever-increasing-parallels-between-aig-a...
If I understand the article above correctly, Greece is about to get "AIG'd". Plan accordingly.
on Mon, 02/08/2010 - 13:19
#222296
Monitizing Money, what it do!
on Mon, 02/08/2010 - 13:49
#222328
I'm sure "Direct" is the very word. Here's a thought: why doesn't the Fed recapitalize Greece on the understanding the busted Hellenics will be the new Indirect Bidder, just for the sake of appearances. It's becoming apparent China won't do it anymore, being at war with us and everything, and Toyota has other problems.
on Mon, 02/08/2010 - 14:00
#222346
Tyler or someone please help me...There are not enough dollars in China and other foreign countries or in the USA etc to buy 5 trillion in treasuries over the next 4-5 years.
So doesnt that mean the Federal Reserve will have to buy a crap load of them? Doesnt that have serious implications? I am sure they will try to keep it on the down low though.
on Mon, 02/08/2010 - 15:28
#222431
its a simple conclusion to arrive at given the current events. the conclusion is that the fed will be the backdoor purchaser of t's for years to come or until inflation begins to pose a serious threat. and if you loook over at our pals in japan they are still waiting for that "welcome" inflation. do not forget we are still the biggest purchasers of our own debt (social security and medicare trusts) and this is just another way to ensure that we keep our debt in the family as much as we can.
the consequences are yet to be seen as my cost of living has actually decreased. yes everyone spurts out their theory of what will happen and how God himself will be coming down in the wake of the overspending but truth is no one knows.
on Mon, 02/08/2010 - 14:01
#222349
Maybe the direct bids are coming from "secondary" dealers who each found a big bag of cash in a dumpster behind the NYFRB
on Mon, 02/08/2010 - 15:16
#222412
Ever been to one of those auctions with the fast talking auctioneer that keeps seeing 'Air' bids?
Bids that don't quite exist except perhaps in his imagination?
Most of the auctions I've gone too people bid too much.
They get overexcited or they think they're in competition with the magical Air bids so they go ahead and go in on a bid they know is too high.
Then, they go ahead and fully rationalize the price they paid by inventing their own economic mythology to back it.
Sad.
-MobBarley
on Mon, 02/08/2010 - 15:20
#222418
does this mean the PD's are losing money 4sure ?
also does this mean that somehow the private sector will transfer these "losses" to the public sector?
on Mon, 02/08/2010 - 15:29
#222433
"What is 'crowding out', Alex?"