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Short End Weakness Continues - Weakest 56-Day Cash Management Bill Auction Follows Lousy 4-Week Bill Auction
The Treasury just closed its 6th consecutive 56-Day $25 Billion auction, and the result, to those who followed yesterday's weakest 4-week auction since August, should not be a surprise. The Bid-To-Cover was the weakest 56-Day SFP CMB auction and the weakest SFP turn out since August 3, 2009. Additional the High Rate of 0.16% was the highest, and compares to yesterday's 4 Week bill High of 0.15%. The Treasury curve is now getting aggressively spooked on the short end. All this is occurring as the UST has realized its folly of trying to duration shift the curve to longer maturities: yesterday we auctioned off an 18-Day CMB, and tomorrow will see the first 10-Day CMB: this is the shortest CMB since September 2008 when we saw a 7-Day Bill, and the exception of a 4-Day CMB issued on December 10, 2009. As for who the biggest participants were - no surprise: dealers accounted for 81.2% of the auction take down. That's another $20 billion worth of stock buying dry powder costing PDs just 0.16% to gun the market for the next 56 days.
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FAIL!
Looks like the after hours gunners are homing in on the Dax now, it has surged nearly 30 points since the market for stocks closed an hour ago! Yet during that normal hours time, the Dax found it difficult to get any bids higher
That's another $20 billion worth of stock buying dry powder costing PDs just 0.16% to gun the market for the next 56 days.
WOW, 56 days =almost 12 more weeks of a rally, I'm all in!!
Hey man, you stole my avatar!
That's OK, so long as they actually do not gun the market for another 56 days.
Otherwise, I will be one heavy drinking monkey trying to reconcile the cognitive dissonance.
Could someone explain that. How, if a PD pays to buy a CMB, do they then have $ to buy stock? I must be missing something in how the treasury deals with PD.
They swap the bills for cash from the Fed, which is totally different from QE where the Fed just buys directly. It is different, because the PDs take the risk on the issuer, the USG, which as we know, takes the risk on the banks.
If you can't see where the line is between the treasury, the Fed and the banks, that's because it's very very feint.... but don't worry, it's all good, they have got your best interests at heart...
I can see the day (say in 5 years) when nearly half of the entire $20 Trillion deficit will roll over in 30 days. For those with a calculator (assuming $10 Trillion is 30 day toilet paper) that means a $333 Billion auction on a daily basis.
Every day will be a roulette wheel "spin" assessment of the health of America. BTW, I'm only half kidding.
So we should all be buying stocks? Are you?
Got phyical gold?
SILVER!!!
Those morons at the Treasury and the Fed have absolutely no idea what they're doing.
Propping up a dead horse (the property market and as a result the stock market) with historic low interest rates and QE (what a joke, Quantitative Easing, aka printing money - sorry, pressing the zero key on a computer keyboard - out of NOTHING), when the horse falls over they'll be surprised as they never knew the horse was dead and had no idea it would fall over.
Thank heaven for the likes of ZH, Joe Saluzzi (Themis Trading), Hugh Hendry (Eclectica Asset Management) et al for telling it like it really is.
DavidC
"Those morons at the Treasury and the Fed have absolutely no idea what they're doing."
At the Treserve, they just do as they are told. Their bosses know what they are doing.
Forgive the ingnorance, but it's my understanding that when the treasury issues bills, notes or bonds, and the Primary Dealers buy them, the money is flowing the other way, from cash or alternative holdings, into treasury paper. This does not create money. It shifts it from the dealers to the government to spend irresponsibly. It is only later, when the government must pay it back, and doesn't have the funds, that new money is created. When the Fed is buying this paper from the dealers, then the new money can go into pumping up whatever overpriced crap is the flavor of the day.
I had the same question but it appears from above that the Primary Dealers take in the cash to play with for 30 days "in the name of the government." I suppose the 30 days is not enough time to bother with all of the accounting niceties of actual ytransferring the funds to the goverment so it is handled on the basis of book entries, credits, debits and such, but the bottom line is that the PD accounts swell with cash that they can then put to use, with the eventual interest expense upon refunding to be charged to the Treserve on the 30th day, again an accounting entry amid the swirling maelstrom of clouds of pixelated money flowing to and fro in gigantic quantities.
thanks. i don't know if this is correct, so i am checking into it. nothing would shock me at this point though.
I see the commentary, which makes sense, if it's true. that's just more printing from the Fed. just a shorter term instrument than usual.
How quickly are these CUSIPS rolling back to the Fed?
Look out bears. Another triangle forming that could lead to an upside blowout.
looks like old Bennie and Timmy used their last day of QE to goose the bond market this morning one last time before rates explode. If the market was down 100 points like earlier I would say the 10yr and 30ys yields were correct, but since they melted the market back up to almost even, no way the bond yields never moved.
People across this country need to start forming lines on Capital Hill and demanding this crap stop for good and never be allowed to happen again. The bubble created by the morons in the FED are going to be even more costly.
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