Treasury Auction Recap

Zero Hedge is starting a new commentary piece, which analyzes the immediate market impact of any most recent Treasury auction. As expected our initial focus will be on today's 10 Year Auction. We expect the tomorrow's $12 billion 30 Year to be markedly more interesting.

Positives –The $20 billion 10 Year issue was well accepted, highlighted by a 2.9bp tail compared to when this bond was first issued in August. The bid-to-cover was up modestly, and was above average, yet the most marked highlight was that indirect bidders took down the most they have in over 3 years. Zero Hedge has still to see an unambiguous definition of the adjusted "indirect" term that is not created by conflicted sources of data or distribution.

Negatives – Subsequent to the auction, the market not only did not recapture this morning’s yield concession, but sold off further. The negative tail is beneficial, but not surprising given the concession going into the auction. $42 million was allocated into SOMA at this reopening. SOMA holdings rolling off this week are light, constraining the Fed in buying at auction.

Comments

[Anonymous]

TD & Crew, really thanks for what you're doing, but a small suggestion; a glossary for those of us not as well versed in industry terminology as you guys, e.g. SOMA. After all, its semi-educated folk like me make up the majority who need to fully understand the info you're exposing.

Great work though, I feel I'm watching history in the making...

A loyal reader!

[deadhead]

http://www.investopedia.com/terms/s/soma.asp

[blackebitda]

so it is like a checkbook to cover daily or short term bank operations?

[Tyler Durden]

SOMA explained: http://www.newyorkfed.org/aboutthefed/fedpoint/fed27.html

[blackebitda]

yes that would help

[cocoablini]

Oh, like terms such as "Momo Quants"

[Anonymous]

Are Internet wars funded by the bond market too?

[Apocalypse Now]

Bravo, when SLP computers are the only ones trading based on government intervention - government actions, government speeches, and geo-political events should be first and foremost since fundamentals have been temporarily suspended.

[ZerOhead]

Ten weeks ago I wouldn't have understood a single thing you just said. Sock puppet market right?

[Anonymous]

do you know how people without connections to research teams, can find the longterm history /graphs to see the bones/details of all these bill/note/bond beasts like bid to cover, tail, % foreign/ima, etc. etc over time? i would love to see what these long term numbers are over time and how various instruments compare...

for example... what % of the ten year over the last 25 years auction to auction has gone to foreign cb and/or ima (international monetary authorities). how is this changing (or not)... what they are buying (or not) etc etc.

thanks, the real USA loves your site

[Hephasteus]

No. The FED would throw the entire world in a volcano to keep that secret. Bonds don't even have names on them to keep then secret. This helps protect the fraudulant participants of our monetary system which without this secrecy would be torn limb from limb by angry mobs.

[Cursive]

What's up with the John Jansen "smackdown?"

[bulldung]

Is there a way to determine the profits paid by the FED to the primary dealers when bonds are purchased ? If so, are they within reason ? Is this a form of payola or are they just saving the country?Bulldung

[irongate]

The most voracious stock rally in a decade has people clamoring for 1yr Tsy paper at the same time they bid AIG and other crap to the moon.  yea.. that makes sense

[ghostfaceinvestah]

It makes sense when you consider this is all liquidity driven.  The financial markets are sloshing in the cheap money Bernanke has printed.

The question is, what happens when the dollar collapses under the weight of all the new dollars issued?

[Anonymous]

greenspan opened his mouth again today..

[Anonymous]

Jesus, Apoc Now, its not even that complex.

If I can borrow at 0.25% from the Fed, of course I'll buy 10s that yield 3 and change percent

[blackebitda]

my understanding is that bond auction supply differs from traditional 

supply notions such that unlike in most cases where increased

supply may imply lower prices; increased new issue bond supply helps

 confirm the pricing of existing secondary bond supply. is this 

acknowledged in the marketplace? 

ialso, if bond investors are willing to moving out farther along the curve, 

then i imagine inflation is not a concern and the benefit of higher

yield and safety outweighs inflation risk?

is an inverted yield curve possible? what is the expected movement

of the US yield curve?

thanks in advance for your time and feed back.