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Stunning 10 Year Auction Closes, With Indirect Bidders Coming At All Time High As Directs Disappear
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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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
Indirect bidder giving new meaning to 'bag holder'. Dollar in turn gets flushed.
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.)
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.
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.
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 !
No, that's when mutually assured destruction occurs
Sounds the same to me.
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.
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...
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.
"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?
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.
Didn't you get the F'ing memo? The Fed is "unsinkable..."
"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!
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.
Agreed!
WOPR is drawing those charts...
-Is this real or a game?
What's the difference?
All I know is that green means "go" and red means "stop". Now if only I could figure out what is stopping...
China wants to be the big holder again?
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.
Yeah, while they stock up on commodities, ie real wealth, Ben and Timmy continue to stand on their heads for the fiat game.
topcalling:
Can I have the other side of that bet? The US just has more tools to delay the bankster collapse than everyone else...
Jamie & Lloyd, Ted & Alice... I mean Timmay & Ben smarter than China?
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.
a
They really are good sports.
Careful now, don't piss them off or they will go Top Gun on our ass!
pods
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.
I blame it on the snow keeping all of the buyers at home
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!)
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.
That is wayyyyyy too rational a reason.
No doubt. It is obviously the bond vigilantes at work.
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.
Then we can keep piling on deficits that they have to finance. Fine with me.
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?
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.
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.
I dont necessarily see a fail. And usa wins again in spite of incredible odds. Ok fun time over. Everyone back to work.
@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.
...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?
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
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.
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.
Ouch!
That's gonna leave a mark.
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.
Exactly, I think they just hold their nose and buy.
Even the central banks need to Buy The Fucking Dip.
In this case, the "dip" is the dollar.
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).
If Fed and CB's are buying it all...is 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?
Thoughts?
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?
I suppose the difference could be that T's on foreign CB balance sheets will remain there rather than be flipped in POMO? If this were true would slow down "hot money" and inflationary impacts of monetization when those T's are repurchased by the Fed?
May the CBs POMO?
all requires more digi-dollars so ags up commodities up china has problem
i think i'm hearing things ... i could swear that the bernank admitted to the chinese holding something in the neighborhood of $2T in US debt, whilst the official numbers indicate they hold about 1/2 of that. perhaps the conspiracy theories about the chinese buying via one of the UK-disguised islands [mann, perhaps?] aren't so conspiratorial after all.
Maybe Bernanke meant to say all of asia holds $2T but he said chinese b/c they all look alike to him. But you're correct China has close $1T in UST, and yes they absolutely do purchase thru managers in London. That's a pretty open secret verified thru the annual adjustments to the monthly TIC data.
Hey Squirrel,
Got any actual evidence of that?
I'm sure he does - but it's in Braille (he's blind, remember?).
@mark, I assume you mean evidence of the Chinese buying thru London.... yeah I have seen solid evidence but I don't have solid proof. In particular, I remember a research piece from Barclays Capital showing in the annual adjustment to monthly TIC data, the decline in London holdings exactly match the increase in Chinese holding. Also, the monthly TIC data and annual TIC data methodologies are different: monthly shows the buying agent and annual shows the ultimate holder, roughly speaking. I posted a link here on ZH before where govt describes the adjustment. Anyway, I've seen the same analysis from others besides Barclays just don't remember where off the top of my head.
Then you'd think the US Treasury, the Chinese government or one of the involved UK bankers might have said something, huh? Sorry, but that less than subtle bread crumb trail's not good enough for me. The assumption is that China is buying Treasuries on the down low, yet aren't smart enough to make sure adjustments don't give it away.
Really?
Scooby-Doo has better plots.
Where did you hear about the Chinese using the Isle of Man as a front for buying UST's?
Various dimwits have been trying to float that idea for more than a year.
Where did you hear about the Chinese using the Isle of Man as a front for buying UST's?
TLT has fallen far enough perhaps, time for some flattening.
BB has got the dollar on the tightrope...periodically, the overall inflation trends must be retraced slightly. If the dollar gets too strong, they print harder, if it gets too weak, a little squeeze here or there. Spreads too flat, just change their bids in the bond market, too steep, same thing.
Seems like price-fixing in the bond markets to be honest. I'm not holding my breath for a stock collapse simply because they have proven they don't need retail money to perpetuate this charade.
Have you seen the pitiful volumes of trades in the stock markets these past months?
...if the Fed is pumping funny money into the Indexes they must be using friggin teaspoons to scoop it in not truckloads of the stuff!
A little bit of nitroglycerin can ruin your day if hit with a hammer!
I agree the corrupt FED told the street to stay away......leave it for the foreigners to re-invest interest. The FED and government have become worst than third-world......there are no free markets (not that there have been in some time but now we know for sure).
No worries, inflation fears are overblown. Bonds will be going up soon, they are very oversold.
USO now down 5 days in a row, 6 out of the last 8 days down.
Meanwhile, retail stocks (i.e. XRT) are up 5 consecutive days.
Party on!
XRT, like IWM yesterday, is up against multi-year wedge/channel resistance (weekly) and ridiculously overextended on the daily. Look for a pull back of some sort.
the girl is shameless. two days ago she was touting oil and gold to the moon. but wait, first she was short gold and oil. then long oil and gold. now she's short oil and gold.
meanwhile, i guess gentleman jim sinclair is back to being a dolt today. yesterday he was a genius in the girl's eye.
There's right logic, wrong logic, and women's logic -- capiche?
How much of that is buying from the BoE? Nothing changes.
and the Caribbean. Maybe Japan now for the US dept of transportation saying yesterday Toyota is in the clear on sudden acceleration problem.
Axel Weber has refused to replace Trichet because Weber knows that there will be no ECB within a few years.
Germany will leave the EMU -- gold will spike to 1800 on the announcement.
Yup, we will either reintroduce the DM or make a smaller Euro group with the non-mediterranean EC countries.
And that might just work ;)
FED bought thru foreign Centarl Banks thru swap agreement
LOL
My bet it was Mubarak..they probably shut off his gold stealing scheme..but he can use his central banks to buy him his future security....treasuries..LOL...
Yep
Yesterdays news .. replayed.
Might we be seeing front running of a pick-up in 10/30 yr purchases? New FRBNY POMO sched out tomorrow.
http://english.economicpolicyjournal.com/2011/02/is-3-decade-bond-bull-market-officially.html
"... how there is such a huge aversion to the short end by Indirects, and such a sudden love affair to the 10 Year ..."
Not claiming to be smarter than Tyler, but common. The sigmal is clear -- recovery will be prolonged, delfationary pressures are still here, and safe yield may be a good place to be.
IMO the real danger is bifurcation in flation (pardon the pun)... with hyperinflation in PMs and commodities (think FOOD) and deflation in everything else... all being greased by collapsing USD and EUR.
Why do we even need the FED? At this rate Timmay could just take over the printing presses and save the taxpayers billions in interest on the bonds by just printing the cash as he needs it. Then again if it was done this way we would be considered the next Weimar Republic and all the CRONIES would not get their pound of flesh from the people.
All is well Stockholm Syndrome sweeping the ZH message boards nicely! Chairsatan will be so pleased.
Somebody bought a huge lot of TLT about 15 min. ago.
1.3 million shares on the 10-min. chart.
What...it wasnt YOU??
SPF unwind cash hitting the market?
Yep- 13:01 454, 208 shares
There's really only two things you need to understand about Treasury auctions:
The indirect bids are the safety net. They pick up whatever the directs and PDs won't, so there will never be a failed auction. I think the correct way to see this auction is that 70% hit the safety net.
I think you hit the mark.
The long end is gonna get sent to Bernakastan, like last year, only with a new & improved model...
Either the Fed banks are behind the indirect, using their offshores, after yesterday's reaction to the low indirect.
Otherwise, I was thinking China is trying to take some pressure of the Yuan.
The 30 year tomorrow should turn out to be quite an event now. Let's see if the indirects remain for that one. If that hits another high indirect, then they can send the long bond back into its trading range.
think we have some sort of deal btw Treasury, PDs and BOE/BOJ/ECB ... cause ben is under rising pressure...but all of them are in trouble as far as I can see so this looks like begining of THE END to me.
Guess PDs cannot support longend anymore because everybody knows they will get nothing on maturity. So they will take care of 1-3y therefore survive until great deflation shopping. CDs will somehow return principal on longend in secret agreement with powerz.
On the way to THE END, PIIGS-eurozone must allways look uglier so we can expect new rounds of intensive "marketing", downgrading, spinning ... lowering EURO and raising EU interest rates.
Think they are all buying time until china blows up in some way.
Greatest fight of all times started in bond market.
Will end with all of us in tears, interest rates in sky, USD high up and cash available only to those which obey.
than real war.
than usd collapse but new currency created ... new ponzi game ...
imho
As I read, I think to myself...this is why Obama sent Volker packing.
Yesterday everyone was freaking out that no cb's wanted our debt. Guess what? A few phone calls were made and today they put in orders. The street still long from yesterday and feeling the pain of the post auction sell off wasn't keen on owning a lot more - longer duration - paper. A reversal not at all surprising. Need to see this play out over time. 2 days don't tell a complete story.
definitely. these days they need all demand they can get as i read somewhere - bond market is huuuuuge and many living souls there ... robots don't work well there.
PS forgot to mention engineered crisis which may "happen suddenly" (even though they are visible and obvious: state defaults, bank defaults, accounting games, foreclosure frauds, zombie banks and hundreds of pure frauds built in fin system) and increase demand temporary
PPS ha ha ha ... now I see these days there was a new idea (in line with bond fight)
http://www.reuters.com/article/2011/02/02/usa-debt-bond-idUSN02213476201...
is it possible to know a little more about guy who proposed this? 525143778 ge+reat LOLs :-D
Everyone was onto their game with the PDs. They had to do a diversionary move to deflect attention and thereby blame. All in a day's work, but the hammer was used where a fly swatter would have sufficed.
I'm sure this Central Bank pile on will be monetized, like Indirects, as agency debt to POMO or whatever. Its just an accounting scheme- and the US buys this crap in Barbados, malta and Antigua as some other entity.
Well, if we are all confused about this switcheroo, then ZHies won't junk me if I suggest that maybe all the Central Banks are coordinating (or rather, taking turns) on their purchases of longer term UST to give the appearance that inflation is no longer a concern. Such a sudden change makes me suspect that the whole world is in the poop so deep that every CB realizes it has to play along.
"..taking down a tiny $118K of the $24 million or about 0.5%.."
Is it just me, or does this math seem wonky? Isn't it BILLION?
This is a stunning post, this should remain on the top header for a few weeks.
Can you say Canary in a coalmine?
When they make the "Behind the Music" on the next collapse, they will show a screen shot of this post and say..."We should have seen this starting right here..."
Tyler, the indirects are the directs and the directs are the indirects. 1984. The UK is the Federal Reserve, an the Federal Reserve is the UK. The logic loop leads to conundrum which leads to a ponzi collapse.
This coincides with a STUNNING head-and-shoulders in the USDCAD between 2008 to now. Will it suddenly go down to $0.70CAD = $1USD within the next few months?
If this were to happen, I'd imagine that many currencies would gain 40% against the USD.