Stunning 10 Year Auction Closes, With Indirect Bidders Coming At All Time High As Directs Disappear

Tyler Durden's picture

Just like in yesterday's 3 Year bond auction, the surface results belie the fireworks within the internals in today's auction. First, the superficial data: the $24 billion in 10 Years came at a 3.67% high yield, the highest since April 2010 (around the time the market starting nosediving and had to be rescued from a double dip through QE2). The Bid To Cover was 3.23, compared to 3.3 previously and 3.17 LTM average, so nothing special, right? Wrong. The take down is where the true story is: after Indirect interest in yesterday's 3 Year bond plunged to a multi-year low, today nothing could be further from the truth as the Indirect Take down was an all time high 71.3%, with foreign central banks taking down $17 billion of the $24 billion total. And maybe even more curious was that for the first time in over 2 years, the Direct Bidders were virtually non-existent, taking down a tiny $118K of the $24 million or about 0.5%. Compare this to the 14.9% in the last auction, and the 12.21% in the last twelve auctions, and a big red alarm should be going off. Basically, someone said "No Directs" in today's auction: the hit rate was a ridiculous 2.2%! Something major has changed in the auction dynamics and it started with yesterday's 3 Year. We wish someone smarter than us could explain to us how there is such a huge aversion to the short end by Indirects, and such a sudden love affair to the 10 Year, coupled with the complete expiration of the Direct bid.

On the chart below note the major surge in the red bar (Indirects) and the collapse in the green one (Directs).

As for the pricing, itsouttahere:

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Cleanclog's picture

Signal that rates won't rise further for a while, or foreign centrals getting ready to buy wheat and corn from USA and Canada to prevent food riots in Asia?  Need those $s

Mr Lennon Hendrix's picture

Indirect bidder giving new meaning to 'bag holder'.  Dollar in turn gets flushed.

jus_lite_reading's picture

The yield has exploded because of the explosive economic growth, you morons! Bernank said so! Wealth effect! Get it? Trickel down wealth or trickle up poverty is the same thing! So you might as well stuff the rish with the cash so they can buy more useless things they don't need.

(Ok, this does set a record and I am worried the global collapse is occurring much faster than anyone is prepared for.)

homersimpson's picture

RE: "We wish someone smarter than us could explain to us how there is such a huge aversion to the short end by Indirects, and such a sudden love affair to the 10 Year, coupled with the complete expiration of the Direct bid. "

I'm not going to lie - I will admit my limitations of certain financial instruments and don't understand the signficance of this event. I wish someone smarter than me in this arena can explain what is going on.

jus_lite_reading's picture

The whole house of cards is crashing and burning. That is what is occurring. Game over.


Nobody except CB's are buying bonds because they are once again trying to postpone the great collapse. This time, I venture to say, they lose.

Just Observing's picture

Well, as long as the REST of us are willing to accept that the central banks are merely shuffling paper back and forth, what difference does it make ?


Somebody has to eventually call BULLSHIT.  Then it gets interesting !

jus_lite_reading's picture



Somebody has to eventually call BULLSHIT.  Then it gets interesting !


No, that's when mutually assured destruction occurs

Dr. Richard Head's picture

Do two auctions of bonds having central banks as the only buyers signal the collapse has begun?  Not being a smart ass, just wondering.  I thought I recalled, back in 2008 (no charts as I am an idiot) three or four auctions in a row where indirect buyers outpaced the direct similiar to the action being seen in the last two auctions? 

Either way, let's get on with the collapse already.  Bring on the golden age and don't get caught in the crossfire during the transition.

jus_lite_reading's picture

Correct but this is the first time by a very wide margin the CB's took up 75%. Think if it as me writing you an IOU, then you selling back to me an WOO (we owe ourselves) after  which point the face value just increased 15% due to inflation. They have reached the end of their run. I know some guys will say this was a good resulted auction but I see trouble brewing. Another 1-2 of these with high indirects and then you know...

Dr. Richard Head's picture

Makes sense.  Thanks.

The primary stealers...sorry, dealers have fucking disappeared too when in comparisson to the past few years.  Wouldn't they step up to the plate with the Fed's tap fully opened or is the primary dealer drop due to their reserves (created or imagined) being utilized to levitate the equity market instead?  I would figure the primary stealers would much rather recycle the regurgitated bonds and take the hit rather than exposing the central tanks, but then again I have substituted my brain with an iCrock.

Iam_Silverman's picture

"Think if it as me writing you an IOU, then you selling back to me an WOO (we owe ourselves) after  which point the face value just increased 15% due to inflation."

So, based on this reasoning, they should have bought TIPS instead?

koot's picture

Simple really.  Try not to make too much of Bid/Cover, Direct, Indirect or price and rates, as the primary is the Fed.  All these auctions are mostly decided days before the date of actual reporting.

Go to the Treasury web site, add up on a month by month basis all amounts on instruments sold.  Some work is required, but if you did the work you will notice the amount of bills sold in last year which is about 70% of all debt sold which requires average roll over of about 3 month time frame.  The current POMO is attempting to move some of this debt into longer term parking, but with nearly 9 trillion in short term bills the  600 billion of QE by the Fed is barely able to keep up with the increase and if rates rise at the short end, the Fed will sink.

This means that QE2 is on a long voyage into territory it is not designed for and no matter what the Bernanke or other Fed people say, they do not have a chart or navigator.

jus_lite_reading's picture

Didn't you get the F'ing memo? The Fed is "unsinkable..."

Iam_Silverman's picture

"Didn't you get the F'ing memo? The Fed is "unsinkable...""

Yeah, but so is the Flying Dutchman.  Doesn't mean I am looking forward to a cruise on her!

mtomato2's picture

Dude.  It's guys like you that make me love Zero Hedge with all my heart.

Next are the ones who patiently answer your question.

Never let this die.

dark pools of soros's picture

WOPR is drawing those charts...  

-Is this real or a game?

What's the difference?

Sheepneck's picture

All I know is that green means "go" and red means "stop".  Now if only I could figure out what is stopping...

papaswamp's picture

China wants to be the big holder again?

topcallingtroll's picture

Hahaha! They dont want to be. They have to be. You see now it is checkmate. USA wins now no matter what happens, but the chinese are stupid and will have to suffer a bit more before they figure it out.

KickIce's picture

Yeah, while they stock up on commodities, ie real wealth, Ben and Timmy continue to stand on their heads for the fiat game.

Problem Is's picture


  1. Jamie n' Lloyd aka Wall Street, Timmay and The Bernank are smart?
  2. China is dumb?

Can I have the other side of that bet? The US just has more tools to delay the bankster collapse than everyone else...

  1. First export it to the Euro zone with derivatives torpedoing EU bonds...
  2. Euro zone says fuck that and starts buying its own bonds...
  3. They all export The Bernank QE hot money flood into commodity speculation to....
  4. North Africa to choruses of  "Burn baby, burn. Disco inferno!"

Jamie & Lloyd, Ted & Alice... I mean Timmay & Ben smarter than China?

bigredmachine's picture

what bizarro world do you live in idiot? Dont you realize you 

are more irrelevent every passing day. p.s There are now at least a thousand 

four inch dicks ready to gang bang your stupid ass.


pods's picture

Careful now, don't piss them off or they will go Top Gun on our ass!


blind squirrel's picture

Wasn't China still out for Chinese New Year 2 days ago, and didn't their markets just re-open last night?  Possibly could that have any effect?

Did they make a conscious decision to add duration after recent sharp sell-off?

I know the auction was expected to be good, and in fact it came 4.5 bps thru the screens.  Somebody really wanted those bonds.

sun tzu's picture

I blame it on the snow keeping all of the buyers at home

StychoKiller's picture

With inflation (the real kind) getting set to surpass 3.67% (if not there already!), what kinda chump would I have to be to PAY the Govt to use my FRNs for 10 years?  (Answer:  1st Class!)

Fourth Horseman of the Apocalypse's picture

Central banks did not want to buy the 3 Year auction because US short term rates are much lower than German Bunds.  However, the US 10 Year Treasury has a higher yield than that of the German Bund.  I have no idea about the Direct Bids other than they were light at both auction but you would expect this in a rising rate environment.  


papaswamp's picture

That is wayyyyyy too rational a reason.

NotApplicable's picture

No doubt. It is obviously the bond vigilantes at work.

unwashedmass's picture


they've all decided to call a halt to Bennie Boy's devaluation of the dollar. Fuck 'im, they will bid it up and screw him on the back end.

Group hug....of everyone EXCEPT THE US.

topcallingtroll's picture

Then we can keep piling on deficits that they have to finance. Fine with me.

moldygoat's picture

He did call a dollar bottom today did he not? That with PTJ's fake rumored top call. So someone play out the scenaro for me, dollar surges, equities surge drop?.........then what? We would need a pretty big swan to convince me that shit is actually out of control and not planned?

I guess I am saying, if the crash is actually going to happen, how? Theories?

Mr Lennon Hendrix's picture

they've all decided

PDs stepped out the way of the falling piano.  Indirect was forced to cover.  It does show that the US Treasurie debt holders want the game to keep going, but the PDs appear done.  I do not think it was the indirects deciding anything.  I think the BRICs et all just got caught with their pants down and under the baby grand.

US Tresuries are not only a losing asset, but a failing one.  No one wants USTs.  No one.  Not even yo momma.

Is this long term bullish for the PDs?  No, the Majors rely on the fiat ponzi continuing and will act sadistically on the economy until the end.  But this could be its end, or at least one of the last breathes, and they have decided they will be sadists and they will be masochists.  Look for much of the latter by not only banks but politicians.  Many will be sacrificed on the alter of the money temple in the year of Boaz and Joachim, '11.

themosmitsos's picture

Tyler, cuz imHo FED can't monetize & roll 3s indefinitely, & CBs know it. FED's going to dominate 10s, as they already do 30s, and try & roll debt out as it monetizes, even while govt debt structure compresses into shorter maturities. They WANT to do Japan. They'll try. They'll fail.

topcallingtroll's picture

I dont necessarily see a fail. And usa wins again in spite of incredible odds. Ok fun time over. Everyone back to work.

blind squirrel's picture

@top, I agree this is US positive.  Shows the Asians are still willing to buy our debt even if it is just to prevent further loss on the mountain of bonds they already own.

The Chinese govt has got its tit in a ringer with these Treasuries and sadly it's the poor hard working Chinese worker that's going to lose.

hedgeless_horseman's picture

...which would explain Ben's permanent shit-eating grin.

Or it could be we just don't understand what an efficient market looks like?

Or maybe astrology?

Zero Govt's picture

not sure about Benny Boys "grin" any longer. He used to look uber-smooth, have a quiet air of authority (even arrogance!) about him and a twinkle in his eye even when being cross-examined in Senate a year or more ago. Today he's lost his positive persona to my mind and the twinkle has been replaced by almost dead worried eyes... I think he may know how close he is to the history books trashing his name if this claimed 'recovery' doesn't push through 

banksterhater's picture

The Beard looks SICK today, he knows damn well he's a financial terrorist. The census showed 5 mil more Americans, many over 65, into POVERTY! WHY??

Because they're losing over $1Trillion a yr on interest! (based on historical CDs 4-5%)

Plus, he's mandating STAGFLATION!


I'd make a citizen's arrest in a heartbeat if I could get near the bastard.

blindfaith's picture

It can't be the 30% of all mortgages (as of yesterday) are in some stage of default or foreclosure, that has this DEVIL worried.

Can't be the real unemployment rate of 22% (like Egypt, Tunisia, and the rest of the east) that has this DEVIL worried.

No I'll bet he looked that way because he was out with the Fraternity brothers celebrating the complete destruction of America. 

We look under the wrong stones for our terrorists. We are no better than a third world country when it comes to powerful corruption and less likely to ever fix it.

Cognitive Dissonance's picture


That's gonna leave a mark.

kentfinance's picture

so the CB's are adding to their USD positions to prop up the USD but the price indicates how they felt about doing it - IMHO the price is the real tell about attitude to the USD asset.

blind squirrel's picture

Exactly, I think they just hold their nose and buy.

Cognitive Dissonance's picture

Even the central banks need to Buy The Fucking Dip.

In this case, the "dip" is the dollar.

Zero Govt's picture

The Central Banks are doing nothing to "support the USD" it's merely businesses needing it as the reserve (global trading) currency...

...face facts the Swiss CB lost 2 Billion CHF last year trying to weaken their currency, the ECB pissed 1 Trillion Euros down the toilet in 24 hours to "support the Euro" and all they got was a 2 Cents rise for 36 hours before the Euro continued its decline. The Japanese CB refused to waste money last year trying to devalue their rising currency.

The Forex markets are massive, CB's don't stand a snowball in hells chance of manipulating currencies (as last year proved beyond all argument).  

hambone's picture

If Fed and CB's are buying it this getting done via interest free dollar swaps?  We create digital, pass to them for .25% or like, tell them to buy, and pay them 3.76% to hold the debt?  That seems a mighty steep price until you realize the Fed will just create more digital to pay the interest and eventual rollover.  CB's of the world get something for nothing and avoid the immediate melt down. 

Still, the impact of this whack a mole game has to come out somewhere.  Dollar depreciation?  More commodity / ag surges?  Anybody got any ideas how dollar is sky rocketing today and commodities falling in the face of this?  Little manipulation maybe???  Other?


newworldorder's picture

I am not even close to being an expert on bonds and this strikes me as - lots of commentary about the mechanism as apposed to policy. We all know that monitization will continue - untill it stops.

What difference does it make if its directs or indirects as long as the FED is providing most (if not all of the juice) for continued purchases, along the entire curve?