Weak $29 Billion 7 Year Auction Prices At 2.25%, Bid To Cover Drops

Tyler Durden's picture

The series of increasingly weak Treasury auctions continues with today's 7 Year $29 billion offering, which just priced at a 2.25% high yield. The yield was a materially higher 28 bps compared to October's 1.97%, and shows that the peak of the curve belly, the point that recently was most desired, is now being shunned the most. The Bid To Cover slumped to an 8 month low 2.63, the lowest since March's 2.61. And most notable, indirect bidders have come at an 8 month low as well, taking down just 42.2%, forcing Primary Dealers who have traditionally have a backseat role in stabilizing the 7 Year to step up and buy almost a majority of the auction (and 57.8% when including Direct Bidders). Now that as (so far only) Zero Hedge disclosed the Fed is the biggest holder of US Treasurys, we expect to see ever decreasing interest by foreign bidders in auctions going forward, especially in the belly, where the Fed will soon be the main holder of securities.

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hedgeless_horseman's picture

Bernanke and Timmy must continue to friend each other, or else the game ends sooner, rather than later.

Dadoomsayer's picture

Gross and Bernanke are obviously friends on Facebook.  Gross sells longer date treasuries and buys MBS right before Bernanke announces that the fed "may" buy MBS.

Good game guys, good game...

HarryWanger's picture

At this point does it even matter who owns the majority of Treasurys? If I had to choose, I guess I'd rather have the Fed own them then China, if you really think about it.

Mr Lennon Hendrix's picture

Ok, you would be agreeing to purchase your own debt.  It does not work that way.

Id fight Gandhi's picture

Buying your own debt and paying fees (primary dealers) to do it as well.

Mr Lennon Hendrix's picture

And telling us we must pay him back with interest for the monie he leant himself, even though we did not have any economic benefit from this scheme.  Sounds to me like this HarryWanger is trying to mess with our monie!

jeff montanye's picture

it's not clear to me that harry's buying the debt from himself as the fed is kind of a strange public/private amalgam not truly a central bank as most other countries have.  whatever, the alarm bell rung in the post above seems as if it may be worth hearing; yields on the five year are up 50% in about fourteen trading days, seemingly counter to what the fed intends.  are they lying (again) or impotent (again)?

HarryWanger's picture

What I'm saying is, the debt is never going to get repaid regardless. Better to not piss off the Chinese by not paying them off than the Fed.

SheepDog-One's picture

God youre pathetic. Not an ounce of self respect or courage in your entire being.

1100-TACTICAL-12's picture

Well said SD-1, Sir...Ooh Rah...

gjp's picture

The Chinese need to be paid somehow for their enormous net exports into the US.  Paying in never-to-be-repaid treasuries has served the US very well.  What alternative means of payment would you choose?  Sell off American companies?  Real estate?  Military technology?

jeff montanye's picture

i would imagine that that (and much more) is in the offing, via a combination of public and private means.  the generations to come are being plundered.

Mr Lennon Hendrix's picture

'So go and buy an ipad while you still can.' 

Ok I read you clearly now.

Fraud-Esq's picture

Why not. 

China does the same thing. 

The Fed is filled with fraud and the 12 trillion bailout is a sham.

But - I'd rather not pay private interest to a private cartel on public debts. 

Max Hunter's picture

The implications of the FED owning treasuries is that we are making the house payment with a visa card.. Quite ominous to some..

DarkMath's picture

I wouldn't say a visa card, it's like we make our payments with a printing press in our basement. In fact it's like everyone is making their debt payments with a printing press in their basement. The end result is massive inflation. Not neccessarily in the increase in M2/M3 but in the resulting insult to the Dollar. Printing money will force dollar holders abroad to dump dollars. That's the real danger. There are more than enough dollars in circulation abroad to cause hyper-inflation here. It's just the whiff of money printing that could cause the dollar to collapse, not the amount of dollars the Fed prints. The Fed's balance sheet is irrelevant at that point. If the world looses confidence in the dollar (and they are) then the gig is up (and it is).

Hyper-inflation is a phsycological condition akin to panic attacks. It's not a monetary condition. There is no formula where you print X amount of dollars you get Y amount of inflation. Economics is not a hard science. Think a combination of sociology and hypnosis.


Max Hunter's picture

Agreed... The point I was trying to make is that you are using money you do not have..  Maybe not the best analogy... But quite ominous nonetheless.

jeff montanye's picture

imo treasuries on the balance sheet of the fed are not as ominous as all the very dubious mortgage backed securities also there.  imo that is where fiscal policy (gifts of money) departs from monetary policy (relationship between treasury debt and federal reserve notes) and the fed advances from very poor policy to actual law breaking.

SheepDog-One's picture

OK Harry, then you better get busy on your 4th part time job to pay it all back. Who the hell do you think theyre talking about when they say 'The FED owns all the treasuries'...and who will be paying that interest? Really, do you know ANYTHING about whats actually going on?

Id fight Gandhi's picture

I'm thinking it's someone purposely saying nonsense.

Nobody can be that ignorant.

HarryWanger's picture

Ignorant?? I know the end result as most here do. My timeframe differs probably. I'm thinking we can keep up the charade for 2 or 3 more decades. In that case, it's best if the Chinese don't keep buying our debt. It's not going to get paid back regardless.

My timeframe dictates wealth generation while possible, so trade with the market and boost your net wealth while you can. 40 or 60 year timeline for when the shit hits the fan is far enough down the road to generate a great amount of wealth.

Max Hunter's picture

WOW... I'm thinking we could have a run on the USD at any moment.. If it survives 2011 I would truly be amazed..

Arkadaba's picture

I absolutely agree!!!

40 - 60 years!!! LMAO

Al Gorerhythm's picture

The uS is gut-shot, sprawled, wounded in the desert and is expected to survive 60 years. I've read that a belly wound is a long painful death, but 60 years? Pythonesquely Hopeful. Monty, that is.

Max Hunter's picture

Just came out.. from NIA... Can't say I see it exactly like this but, something like this, but I think it will be sooner..



SheepDog-One's picture

40-60 years, OMFG Harry youll be incredibly lucky to see 40-60 WEEKS before the shit hits the fan.

Mr Lennon Hendrix's picture

Economics plus geology equals.....

supply/demand +

Peak Oil:


Arkadaba's picture

I was thinking of that as well.

DavidC's picture

When the Chinese and Russians are talking of trading between themselves in currencies other than the dollar, one can't help thinking that your charade time frame of 2 or 3 decades is somewhat generous.


1100-TACTICAL-12's picture

The writing is plainly on the wall, year's maybe decades not....

jeff montanye's picture

the ben bernanke is not acting as if he thinks he has decades or even years.

Cleanclog's picture

Foreigners less interested, btc down, debt losing lustre.  Better refi while ya can.  Gonna get sloppy before long.

Cdad's picture


Simultaneous to this news, SPY creation units sold short in the AH session last night at $120.13 have now all been covered...as the counter trend HFT currency bid up in the Euro, with riots in the streets of the UK, has now ended.

Nice.  I wonder if the SEC is still "taking comments" from the criminal syndicate known as Wall Street on how best to not enforce any laws...while, counter intuitively, FBI agents raid hedge funds and arrest folk, and the FDIC announces three hundred legal put backs!

And CNBC rocks on with wall to wall coverage of Black Friday shopping guesses.

Fraud Bitchez!

Propaganda Bitchez!

Additional:  Oh, and more than 250 years worth of earnings are now reflected in the shares of CRM per today's sweet price manipulation...too.


goldmiddelfinger's picture

CNBC Channell Checks !! Ooops, that was a slip.

Guess Dana Telsey's next? Her whole business model is based on inside info:

TAG is dedicated to delivering to you unbiased, in-depth company and sector analysis, trend analysis, and forecasting. We utilize a 360 degree comprehensive approach to research ranging from the mall to the boardroom. We provide you with a holistic view of the consumer sector through our in-depth knowledge, industry relationships, and analytical insights




"industry relationships". Hmmmmm

Mr Lennon Hendrix's picture

Gold and platinum are dripping on the news, salivating at the fact that once again money will be moving away from treasurie bonds.  Soon the two will break to new highs.  Silver is breaking out upon the results after consolidating tightly at $27.50.  The co opted government, this fascist entity, is facing the end game.  They can not print too much longer, even the BS Bowles Simpson (BS) Commission knows this.  While the rest of the world warms to austerity, America will face the cold with the close of a door.  Welcome to the cold world, America.

crosey's picture

Austerity in America will happen, and it will be a good thing.  Even TPTB will be subject to it.  Not many rocks left to hide under.

Bring it on!  I'm ready.  Let the cleansing begin.

Mr Lennon Hendrix's picture

There will be aaustery for the sheeple, the sheeple who have already been fleeced, now cold and hungry, they will starve then, and by that time, the dollar as an international standard will be utterly shunned by the world.  Yuan for rubles anyone?

spongeBOB's picture

EUR/USD is dumping, bonds are sliding but stocks and oil are rallying? I confused !!!!

Cdad's picture

It is the unintended consequences of our insane Fed chairman.  Misapplication of capital.  Forced capital allocation via the Fed.

He has said it openly now.  He intends for you to pay up for CRM so that bankers can make it going both ways, sideways, and no ways...while your savings languish.

It is moral hazard, rewarding profligate spenders, punishing savers.

It is an intervention, a fraudulent banker protection racket.

spongeBOB's picture

So what you're saying is money is flowing into stocks and commodities and out if bonds after a weak auction? If so shouldn't the USD be dumping also. Just trying to understand the ponzi MO.

Cdad's picture

If I get your question, the ponzi is simply an algo.  You don't have the secret algo password.  You are a serf, probably trying to analyze something fundamental.  LOL!

Listen, JP Morgan simply needs you to pile in here, OK?  Just pile in the dumbest thing you can find.  Because everything is great now.  You should just buy...oh, I don't know...SPY.  Yeah, there you go.

It'll be easier if you ask less questions next time.

Mr Lennon Hendrix's picture

Decreasing supply of oil and stable demand (if not increasing world demand) is raising the price of oil.  Same with gold, but there is a flight to gold because all currencies are done, with the Euro spotlighted by Ireland.  Silver is seeing a tie on the dollar as the currencies stick together whether people name call or not.  The dollar is on life support, and electro shock therapy.  The babe has been since tricky dick took her off of the gold standard.  She was given hope to walk by a Kennedy silver standard, but her financiers couldn't have her creating her own world.  They wanted her in the cave unless she was performing.  Her life's performance is in its final act.  Curtains with peak oil.

ibjamming's picture

It's genius actually..."The Fed" (a mysterious entity with "lots of money") "buys" our debt.  We buy our own debt, and we never care if we pay ourselves back...as long as we can collect an interest payment every year.  As long as everyone believes that "The Fed" has money, it can go on forever.  "Buy more"...monetize more...erase/put off your debt.


Besides, all this does is "erase" all that collateralized mortgage debt, taking it off the banks hands.  The "Fed" (government) will soon "own" a lot of mortgages...and a lot of real estate that has defaulted with no clear mortgage holder in sight.  Yup...CMOs and their ilk sure screwed things up.  Greedy bastards...


The question is WILL everyone accept that "our rich uncle Fed" is keeping us afloat or realize it's all an accounting game.

SheepDog-One's picture

Oh you'll be paying, dont even worry about that! Sure right now it all seems to be some abstract concept 'we own all our own debt so what'...take a look at Ireland and the rest of Europes austerity measures....also known as 'indentured servitude'...WHO exactly do people think will be paying back our own debt? YOU will! Along with your confiscated retirement...your kids will be nothing but slaves kepping only a very small amount of what they ever earn, if anything.

Cdad's picture

And folk just don't get it, Dog.  They just do not understand what is happening RIGHT NOW!

Is it the fluoride?

SheepDog-One's picture

Ah yes, the flouride as in Dr Strangelove- 'You never see a Russian drink the water...they only drink vodka! Its the flouride'!

Arkadaba's picture

I'm really hoping that the Irish people will not stand for this transfer of wealth - bailing out the banks (Irish and Euro central banks to whom the Irish banks owe money) and making middle and working class pay for it. The budget includes new property taxes, taxes on water and an increase in VAT, which is already very high and which the working and middle classes will notice much more than the wealthy.

The Irish are well-educated, politically aware and understand rebellion. If they don't rise up and repudiate this deal with the devil, I'm not sure who will.

I would like to see how much of the IMF/EU/UK bailout money is going to the banks and how much is going to the government - anyone have a breakdown?

Cdad's picture

I used to admire the Irish...until two days ago.  I thought they were a prideful bunch, self sufficient, tough.

And over they rolled...now another set of indentured servants to the UK and Germany.  Sad story, really.

But of course, they could turn it all around tomorrow.  Maybe they have turned it around, too...but I just don't know because of the wall to wall coverage here on Black Friday Shopping.

Revolution!  Defund the malls and give silver coins for Christmas this year.

Arkadaba's picture

The government rolled over - the people haven't yet. I am going to be watching this. 

At the very least, there will be a new election in the next few months. What might happen is a non-confidence vote (triggers an election right away) if enough people complain. 

Cdad's picture

That's great, but for now, more shit in the streets should be on fire...if what I always thought about the Irish is anywhere near true anymore.