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Weak 5 Year Auction Shakes Treasury Complex: Enormous Tail, Indirects Drop, Bid To Cover Weakest Since September

Tyler Durden's picture




 
  • $42 billion 5 year prices at 2.605 high yield (29.97 allotted at high)
  • Bid To Cover at 2.55 weakest since September 2009, last 2.75, average in last year 2.50
  • Indirect take down meager 39.66, lowest since July 2009, last 40.33, average in last year 46.03
  • Directs continue to be major presence at 10.76, last at 12.85%
  • Enormous tail, as auction prices well above the WI, which had been trading at 2.568%. This is the worst tail since July 2009, which was 5.3 bps


 

 

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Wed, 03/24/2010 - 13:25 | 274598 rubearish10
rubearish10's picture

Could this be the crack/rate breakout nobody wants? Except us...

Wed, 03/24/2010 - 13:27 | 274600 Prof Gulliver
Prof Gulliver's picture

Remarkable there's not even a little "rush to safety" considering Portugal, or the stock market is shrugging off this incredibly weak auction. As Oliver Twist would say, "Please sir, may I have some more risk."

Wed, 03/24/2010 - 13:29 | 274606 rubearish10
rubearish10's picture

I suspect we'll have a swift afternoon equity selloff. Oh, perhaps we should thank HealthCare??

Wed, 03/24/2010 - 13:33 | 274610 crosey
crosey's picture

Choppy day on the emini 500s, for sure.  Internals weak, favoring the bears, at least for now.

Wed, 03/24/2010 - 16:08 | 274840 Prof Gulliver
Prof Gulliver's picture

Dow ended down one-half of 1 percent. I guess that qualifies as a selloff these days.

Wed, 03/24/2010 - 13:32 | 274612 Stranger
Stranger's picture

The people buying this do not care that there is a risk of default. The only default possible on US bonds is through inflation. The people buying this are printing money to buy it. It cost them nothing to buy what amounts to a rent. They are the inflaters. They will keep buying until Dow 100,000. Then they might buy stocks.

Wed, 03/24/2010 - 14:16 | 274673 Ivanovich
Ivanovich's picture

That's because there IS no risk of default.  Not when everyone is bailed out.

Wed, 03/24/2010 - 13:30 | 274608 crosey
crosey's picture

What is meant by "enormous tail"?  Thanks.

No "Frat" jokes, please!

Wed, 03/24/2010 - 14:44 | 274712 Captain Obviousness
Captain Obviousness's picture

I believe it means that the yield of treasuries purchased at the end of the auction is much higher than the yield of the same treasuries before the auction.  In other words by the end of the auction there is less demand for the treasuries so it takes higher yield to get buyers to swoop in.  Or something like that.

Wed, 03/24/2010 - 15:16 | 274764 Clycntct
Clycntct's picture

I'm looking for hieroglyphics interpretation also.

The difference between the high bid and the median bid -- the so-called “tail” -- on Treasury securities

Wed, 03/24/2010 - 13:36 | 274617 thewhigs
thewhigs's picture

Rick Santelli would give this auction a big fat "F"....this was a terrible auction.

Wed, 03/24/2010 - 13:38 | 274623 Cognitive Dissonance
Cognitive Dissonance's picture

Where is Santelli?

Wed, 03/24/2010 - 14:46 | 274718 Nout Wellink
Nout Wellink's picture

Silently removed by CNBC and put into a dark dungeon until tomorrow.

Wed, 03/24/2010 - 15:23 | 274771 Cognitive Dissonance
Cognitive Dissonance's picture

How long does it take to water board a person 183 times, can we expect to actually see Santelli tomorrow and will he be coherent if he does show up?

Wed, 03/24/2010 - 13:47 | 274638 HelluvaEngineer
HelluvaEngineer's picture

You mean if he weren't locked in a tower on Elba?

Wed, 03/24/2010 - 14:29 | 274691 WaterWings
WaterWings's picture

Except that it will be more like crossing the Potomac instead of Waterloo when he comes back.

Wed, 03/24/2010 - 13:36 | 274618 docj
docj's picture

This is, of course, bullish.  UNLEASH THE PPT!!!

Wed, 03/24/2010 - 13:38 | 274620 ciscokid
ciscokid's picture

We might have a repeat of 2008.

Wed, 03/24/2010 - 13:39 | 274626 rubearish10
rubearish10's picture

Might?

Wed, 03/24/2010 - 14:30 | 274693 tmosley
tmosley's picture

More like 476.

Wed, 03/24/2010 - 13:42 | 274630 Brindle702
Brindle702's picture

Can anyone tell me why the US Dollar is rising so much today?  (US Dollar index at 82.11 at the moment.)

Wed, 03/24/2010 - 13:55 | 274650 Orly
Orly's picture

Risk aversion.

Traders are getting scared that this thing is going to topple, so they are moving their money into USD denominated assets, particularly dollars.

Wed, 03/24/2010 - 14:17 | 274674 Ivanovich
Ivanovich's picture

Currency markets have not been following the new highs of equities.  They've been warning something is amiss for a week and a half now.

Wed, 03/24/2010 - 14:41 | 274709 Orly
Orly's picture

Tak, Ivanovich, you are correct.

The thing is that there are some undercurrents moving that I don't quite understand.  The USD took off on the JPY, while the EUR dipped on the JPY and quickly rebounded.  All this over the past couple of days.

Something is definitely not right- or should I say "normal"- in the currency markets lately.  There are rumors of the Swiss preparing to buy more Euros but the sheer volume isn't enough to quake the markets to any great degree.

The global central banks are still doing their level best to prop up the Euro, despite obvious and on-going problems.  They are rotating through currencies and now is the time for the Euro to settle down and move back to parity with the USD.  They can't allow it to move too fast, so they are applying the air brakes as much as they can.

Looking at the chaotic nature of the moves in the EUR lately, it almost looks like they are beginning to lose a grip on it.  While the Swiss threaten to prop up the CHF through EUR purchases, the move would be counter to what the central banks want to happen.

Looks like a battle of wills is shaping up somewhere in the world and the battleground is the EUR.  These are interesting times.

I hope they are profitable for you!

:D

Wed, 03/24/2010 - 15:25 | 274773 Cognitive Dissonance
Cognitive Dissonance's picture

Very astute observations Orly. And here I thought you were just a pretty face. Shame on me for being a sexist.

Wed, 03/24/2010 - 21:10 | 275180 trav7777
trav7777's picture

The moves of the DXY should not be considered probative of risk aversion.

They're merely reflecting FX trends.

The USD is not a risk aversion trade.

Wed, 03/24/2010 - 13:42 | 274631 TooBearish
TooBearish's picture

Santelli seems to be on a bit of a leave since his last tiff with Liesman ...hope he goes to FOX

Wed, 03/24/2010 - 13:52 | 274646 moldygoat
moldygoat's picture

Liesman should go to Fox and join the other ass clowns over there.

 

Wed, 03/24/2010 - 14:48 | 274721 Headbanger
Headbanger's picture

No I think Liesman would be a much better fit at The Weather Channel.

Wed, 03/24/2010 - 13:45 | 274636 HelluvaEngineer
HelluvaEngineer's picture

Pfft... Nobody 'cept losers want treasuries.  The winners in life are buying Citibank and Sears.

Wed, 03/24/2010 - 13:45 | 274637 Stu
Stu's picture

Last LIBOR 3 - month reversal in Sept 08...LIBOR creeping up now @ .285.... Portents of doom ?

Wed, 03/24/2010 - 13:49 | 274640 scofflaw
scofflaw's picture

Forex is all relative and with the PIIGShit hitting the fan the euro is considered more crappier than the pretty crappy dollar. 

Wed, 03/24/2010 - 14:05 | 274659 Chartist
Chartist's picture

I wouldn't count on a big pullback in stocks.....This market has a date with 1200 on the SPX and I believe it happens before the end of April....The reason being, the earnings comps get much tougher in the second half of the year.

Wed, 03/24/2010 - 14:11 | 274665 jkruffin
jkruffin's picture

So I guess the 7-yr tomorrow goes off at 3.310  yield or higher,  seeing what happened to 5yr today compared to last month.  Here comes the interest rate hike soon, along with FAT ASS bag of hyper-inflation.  Probably start seeing inflation bigtime last Q this year.  I think we see the rate hike around June/July.

Wed, 03/24/2010 - 14:18 | 274677 Blithering ORSA
Blithering ORSA's picture

Hmm....So your saying that the tail just wagged this dog of an auction?

Wed, 03/24/2010 - 14:43 | 274710 Blue Water
Blue Water's picture

Was to be expected at end of Q.E. v1.0.....

Wed, 03/24/2010 - 14:48 | 274720 Rick64
Rick64's picture

Whatever happens they will not let the Q1 end down.

Wed, 03/24/2010 - 14:57 | 274733 mister_x
mister_x's picture

And Gold gets clobbered. Oh, I forgot...that's because of the stronger dollar.

Can't catch a break.

 

Wed, 03/24/2010 - 15:10 | 274751 dcb
dcb's picture

folks, the game is for they buyers to make money. that mean bond rally in couple days. or stocks fall. always happens after big auction. easy way to make money.

Wed, 03/24/2010 - 16:40 | 274856 viahj
viahj's picture

If the next auction goes jsut as bad, do we expect life support (PPT) to be pulled from equities in a chase of dollars to USTs?  Once artificial support is removed, how long will equities float at current levels with only fundamentals supporting value?

Maybe the continued fall of the Euro will be enough to chase buyers to the UST...for a while.

Wed, 03/24/2010 - 17:23 | 274951 johngaltfla
johngaltfla's picture

Insert mushroom cloud here.

The government is going to have to hurry up and crash the equity markets soon so they can save their bacon and seize all of those taxpayer accounts or this could get seriously u-g-l-y at the next 10 or 30 year auction......

Tue, 04/13/2010 - 06:46 | 297828 mark456
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