You Fail at Failed Treasury Auctions

Marla Singer's picture

For some reason Zero Hedge is prone to take a great deal of heat (both directly radiated and reflected) whenever we opine on the (rather obvious to us) prospect that interest rates might actually (quelle surprise) rise in this environment.  Today, rather than engage in "we told you so" gloating, or endure the repetitive pleadings of commentators that this or that Treasury auction was really a success if you just look a little deeper at the figures, we'll just quote Bloomberg quoting other fixed income observers on today's auction of two years, in an article "ambiguously" titled "U.S. 2-Year Yields Highest Since October After $44 Billion Sale."

Treasury two-year note yields reached the highest levels since October as an investor class that includes foreign central banks bought the least of the debt in five months at today’s record-tying $44 billion auction.


Indirect bidders purchased 34.8 percent of the notes, the lowest amount since July, and below the average for the past 10 sales of 45 percent. Treasuries of all maturities have fallen 3.6 percent this year, according to Bank of America Merrill Lynch indexes. That would be the worst performance since at least 1978, when Merrill began collecting the data.

We aren't really sure how this will be spun into a "good thing,"™ but we are sure that someone will find a way.  Back to you, CNBC.

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TraderMark's picture

Completely off topic, but $600M by healthcare industry buys a heck of a healthcare bill - for them.  Revolving door between Congress, and ex-Congressional workers spinning like Macy's NYC door 3 days before Christmas.

Anonymous's picture

also, off topic but here is Turbo_Tim's email:

reach out Zeros....
keep your subject lines succinct though

Anonymous's picture

Also completely off topic but slightly more interesting...

Passport is going to request delivery for the gold contracts of investors in its $1.2 billion Global Strategy hedge fund:

bb5's picture

Thanks for great link!

Grandpa Bear Hug's picture

In 1789 George Washington stated in a letter to James Madison, "no generation has the right to contract debts greater than can be paid off during the course of its own existence".

Clearly, 220 years later, our administration and "representatives" have a much different view of future generations.

Keep up the great work Zero Hedge as 2010 will likely prove to be a most interesting year for all generations!

Daedal's picture


Clearly you're a dilettante of modern economics. As has been stated by our knowledgeable leaders, the only way to a fiscally responsible future is by increasing both our deficit and our unfunded liabilities.

Grandpa Bear Hug's picture

Your sarcasm does bring a smile however do not assume that grandpa does not have serious intentions. My kids and  grandchildren remain my focus and the energy expended on their behalf is not deemed dabbling...

Keep up the posts...and imagine the impact Zero Hedge could have on congress if they knew how to read. Clearly they have a reading disorder given the fact that they continue to pass legislation without reading the bill...

Daedal's picture

I hear you, friend.

Behind my sarcasm is a cynical immigrant who finds bitter irony in residing within a country that is rapidly transforming into the country he once fled.

besodemuerte's picture

lol your welcome Daedal!  Just wait until you see what surprise we really have in store for you once our financial system deteriorates!

Cursive's picture

@ Daedal

How far we have fallen.  We were once the envy of the world, now we are the envy of world corruption.  Although I must endure snickering every time I say it, a better future awaits America once we rid ourselves of the current cancer.  Things will get much darker from here, but I believe there is a light at the end of this tunnel.  Unfortunately, some of us won't make it all the way, but future generations will thank us.  ZH is a big contributor to that brighter future.

Daedal's picture

How far we have fallen.

No doubt. But I must acknowledge that I fall into the "we" category, for I was in the states since 1990, and have already spent most of my life, and all of my adult life, in America as an American citizen. Undoubtedly I am very much Americanized, but I still have a frame of reference of the communist hell that my family escaped, and I find it sadly ironic that the word 'communism' continues to have a negative connotation amongst most Americans, even though many of them embrace communist ideals, with the President (former and present) notwithstanding.

Andrew_Miller's picture

Uzhas_sovka, is that you? We miss you in livejournal.

Daedal's picture

A Miller,

Net, I'm not Uzhas. Sorry to disappoint.

novanglus's picture

I believe it was that great economist (who has an MBA from UCLA, donchaknow), who said that debt is a measure of how wealthy we are!


Anonymous's picture

"debt = wealth" sounds incredible, but I think that central banks such as the Fed with its monetarists at helm, makes no distinction between debt and equity. The current folks and most commentators in MSM (Krugman, Martin Wolf, all the major banks' chief economists) are upholding "print into a glorious future", with an occasional lip service to "exit strategy". I keep reading that we would get out of this debt circle, but I really don't see how. Someone knows how, please speak so we can act, instead of just writing more comments.

Anonymous's picture

It would be moral to simply repudiate the debt.
It would ethical to simply repudiate the debt.
It would be legal to simply repudiate the debt.
It might result in a total clusterfuck to repudiate the debt.

Cursive's picture


Lulz.  Like it.  Yeah, clusterf*ck to be sure.  Probably the end of the financial world as we know it.  And talk about production following off of a cliff....

Fidel Sarcastro's picture

Point of order Marla - I believe the Lame Stream Media (LSM) outlet you mentioned is CNBS. 

johngaltfla's picture

Thank you Bloomberg for stating what many of us have been saying for a long time. If the Fed won't set rates, the markets will bulldoze over them and tell the truth. And the reality is they are tired of being told that worthless crappola RMBS and CMBS is equal to a US Treasury. Thus the world will simply adjust the values of our Treasuries to equal in yield what the crappola is worth. I can see a 6.5% yield on the 10 year in 2010 EASILY. Maybe even a 7.5%. That should cluster up Geithner and Co. pretty severely if the Fed doesn't start monetizing at light speed to keep it under 6.

Nikki's picture

Makes my TBT look good.... and I suspect from your logo it is you I owe a thank you to....

Rusty_Shackleford's picture

Hey Nikki,

You know everything

That there is to do.


DoChenRollingBearing's picture

TBT and (physical) gold are my best suggestions that I have bought to get us through this nightmare we are looking at.

Disclosure: like many of us I hold stocks, bonds and real estate.  But my best guess is that GOLD will see us through.

Best of luck!

Cognitive Dissonance's picture

"We aren't really sure how this will be spun into a "good thing,"™ but we are sure that someone will find a way.  Back to you, CNBC."

There is no doubt that we have left reality behind and are completely and utterly in the Twilight Zone. I spent the weekend reading up on the 70's and early 80's (when "deficits didn't matter") the last time we tried a similar experiment in excessive printing and delusional thinking.

The parallels are fascinating, both in how similar they are with that time period (in some respects) and how completely different they are in other ways. Back then we still had some trust in the world, both with other nations and with our leaders, at least economically. Back then, we had a population that wasn't completely seduced by the TV, wasn't in way over their head in debt and were savers more than spenders. The same can't be said today.

The next few years will be interesting. A lot of third rails are not only going to be touched but ripped up and thrown overboard. There is no way we will be able to service our national debit without slashing social programs. But don't you dare touch the military. Gotta keep the soldiers paid and equipped if you're going to keep order in the states.

Anonymous's picture

lol! au contaire! now there appears to be no bottoms to these bails....

Anonymous's picture

viva la hamp. dude your name in swedish would be " arhundretts brott".

jbc77's picture

The seperation from reality, entering the twilight zone that has become U.S finance still amazes me....less so today than it did say five years ago. The greatest thing to ever come from the internet is simply the truth. No longer do the masses need to beleive whatever they hear on TV. I just wish more serfs sought out the truth that is found on zerohedge and like minded sites.

We are all in for a day of reckoning. The only question is when.....


Psquared's picture

CD, just curious, but what did you read? I have begun several books but many of the recent ones are rubbish. Chancellor's book on booms and busts ("Devil Take the Hindmost") is readable and lays a good foundation on which to analyze the subprime/real estate speculation bubble.

I also have Kindleberger's book ("A History of Financial Crises") and one by John Lubetkin on the panic of 1873. ("Jay Cooke's Gamble")

Another one that was recommended to me was "The Myth of the Rational Market" by Justin Fox

Maybe ZH will post a reading list.

deadhead's picture

i read the J. Fox book and it was very unimpressive sad to say.

Cognitive Dissonance's picture


I didn't read a "book" but rather spent Saturday and Sunday using that wonderful thing called the Internet. I would do a search for "inflation during the 1970's" or "deficit spending during the 1970's" and then start clicking.

The great thing about doing it this way is the wide variety of subjects, authors and opinion you dig up. And always always always, one click brings you to 10 more possible and potential clicks. Yes, you dig up a lot of garbage. But you can quickly tell which is which and dispense with the dead ends.

While I still read "books", as I said in my last article, all writers are propagandists and what I really want to read is their source material, not their opinions. Sometimes I will go to the library and have the librarian direct me to the latest economic or history books. I immediately flip to the back and copy the reference material used. From there the sky is the limit.

I have learned over the past few years that I'm more than capable of making up my own mind concerning any subject I wish to explore. All I need do is some research. Of particular importance to me is what the writer/author doesn't tell me rather than what s/he does. Items omitted are often far more important to me than items acknowledged. If I'm a writer and I wish to promote my opinion, I'm certainly not going to include information contrary to my thesis. Not if I wish to sell the book to a wide audience.

It's the contrary information I want to see, the small unmarked paths and walkways that lead to new and clearer understandings. The conventional wisdom has no attraction to me and most books that are widely published and accepted are exactly that, (re)packaged conventional wisdom with a few "surprises" to attract the flies.

Psquared's picture

I am very much the same way. I will read contrary opinions sometimes to see where they diverge. Often they are not as dogmatically opposed as one might think.

I agree as well that historians have a way of stating their own predilections in their accounts. (Which are mostly their opinions anyway.) Philosophically, I am not so certain that there is such a thing as truth in this life. We can approximate it, but there is always a "black swan."

Let me rephrase that ... I don't think it is possible to discover the "absolute truth" in this mortal life. Whether there is/are some absolute truth(s) is more a matter of religion than some dialectic.

I also agree that the source material is crucial. But even more important is the interpretation put on that material - both by some author and by you/me as the reader. But sometimes source material is not readily available, or it requires extensive study and expertise. Then I find it useful to read what someone else has written about that source material. Clearly it is important to know who the author is and what bias he/she may carry.

For example, if you were to read something by Gary North it would be crucial to know that he is considered by many to be a "Christian Reconstuctionist." It would also be important to know that he is opposed to fractional reserve banking and that he considers himself to be a Christian Fundamentalist and an adherent of "natural law."

It takes a lot of discipline and years (age) to not be too influenced by a writer's "opinions."

DoChenRollingBearing's picture

Kind of close to your reading, I like to read the EXTREMIST posts/rants.  I find many ideas among them.  I have gotten a few very useful tips to make me money or give me good perspectives from those with views outside the box.

Exploration of unmarked paths (and similar) has provided me, as an individual investor scared off his butt, alternatives in keeping my individual butt safe in these scary times.

Lux Fiat's picture

I hope that this is a redux of the 70's (which ultimately had a reasonably good ending after a lot of pain), and that there is the willpower to slash those social programs currently on auto-pilot.  Unfortunately, due to our low savings and high debt, it will cause a lot of distress for those who entrusted their retirement security to the government.  In case the willpower does not materialize, my weekend reading is going to be on the Argentinean debt crisis that started a decade ago.

God only knows what is going through Paul Volcker's mind.

Mad Max's picture

The "good ending" was a combination of chance and one very firm-willed individual (Volcker), who is marginalized today.  No one really in power today would have his firm will.  The 70's ended on the verge of hyperinflation.  Without the good luck and resolute individual, I think our sequel will go all the way.  Timing unknown.

brodix's picture

Does it occur to any of the economic minds here that Volcker curing inflation is as much propaganda as any thing else?

 Inflation is caused by loose money, but higher rates reward those with money to lend, while penalizing those wanting to borrow it and causing a recession. How do you cure an oversupply of capital by destroying demand for it?

 What's the difference between the Fed selling debt it is holding and the Treasury issuing fresh debt? The Fed retires the money it gets and the Treasury spends it. Now which would be more effective in getting the economy moving and thus increasing the demand for capital to bring it in line with supply and curing inflation? 

 The problem is that, by the Fed's very own logic, if there is a surplus of money in the economy, it is in the hands of savers. Remember that when the Fed sells debt to draw down the money supply, it sells it to those with the money to buy them. The high priests of our national religion cannot admit that large pools of excess wealth are the equivalent of fat cells in the economic system. As the old saying goes, money is like manure. Spread it around and it makes good fertilizer, but put it in a big pile and it just smells.


KevinB's picture

How do you cure an oversupply of capital by destroying demand for it?

Perhaps you should read up on fractional banking and how it works.

Anonymous's picture

Even the Caesars knew better than to bring a hardened army home to a restive populace.

SWRichmond's picture

A thought has (finally) occurred to me regarding the military and the end of empire.  Political leadership will not be willing to sacrifice empire as readily as they are to sacrifice young lives.  As the economic situation deteriorates, conditions within the military will deteriorate more rapidly.  The politicians know that the global perception of the American empire crumbling will accelerate the crumbling of the currency, and so on, and they will not be willing to admit (allowed by their handler bankers to admit) the empire cannot be maintained.  What this means is very simple: the military will be put under increasing pressure to do more and more with less and less.  Fewer troops, spread more thinly, with less equipment and with equipment in increasingly poor repair as the years drag on.  Incrementally more and more dangerous for them.

We need to bring them home sooner rather than later.


Anonymous's picture

you mean from all of our 1500-2000 bases spread
over the globe?

Psquared's picture

Yeah ... thats what he means.

I read somewhere that we have somewhere near 3/4 a million military personnel stationed outside of this country in all those bases. (I assume that includes support and logistics.) If social order breaks down you would only want the most loyal troops at home. Seems to me keeping all those troops overseas serves two domestic purposes. One, it keeps the populace distracted and two the non-career military might side with the "people" so best keep them on foreign soil.

B9K9's picture

Sigh, I expected more from you. (And for those of you wishing & hoping for some type of end-of-70s/Volcker outcome as well.)

Here's how it plays out: US military planners are well aware that our economy, as it is currently constructed (ie with key industries nationalized) does not, and cannot, generate sufficient real "wealth" production to afford both guns & butter. Riddle me this: Which duty is specifically proscribed in the Constitution, that "dead letter" to which all servicemen & women swear allegiance?

The types of news items & trends that are discussed ad infinitum @ ZH and across the interwebs are not only more than well understood by the officer corps, but have probably been war gamed an endless number of times, by RAND & other think tanks, with the same exact set of outcomes: Fail.

As Trav and a few other macro aficionados have noted, just possessing/controlling the ME oil reserves (yes, Virginia, now you know why we are there) only maintains the status quo. Without some key technological breakthroughs, it doesn't buy you shit in terms of the oh-so-necessary pyramiding of new debt tranches to keep the fractional reserve system going.

So guess what happens when the great engine begins to really slow down and show some wear & tear? With US nationalization of key industries & massive, unfunded social programs scarfing up all available investment capital, where is the next "big thing" gonna come from to save our collective bacon this time around? What if there isn't anything? Then what gets cut first & foremost? Defense? LOL!

The real shit has yet to even be extruded, much less hit the fan. Unless things turn around pretty quickly, many cannot comprehend how readily & rapidly our society can fail - as all others have done throughout recorded history. If/when our security situation becomes untenable, that's when we'll really begin to see a full range of outlying possibilities suddenly become our reality.

As for you 70s buffs, try this on for size:

  • US domestic peak oil production had only been reached a few years before
  • US auto mfg still had something like an 80-90% market share
  • US off shoring was only a dream in some financial engineer's head
  • US demographics still provided for only a "slightly" bankrupt SS, not the complete & utter shell that it is today

The 10s are going to look nothing like the 70s; they are going to look like the 90s. That is, the 1790s in France. Bring it on, bitch.

SWRichmond's picture

You continue to read something into my posts that just isn't there, and it's a mystery to me why you do it, but w/e.  They will run out of ability to fund the military, but will try to keep the missions the same, even if the end of that ability comes quickly.  Even the status quo cannot be maintained with the current, degenrating fiscal situation.

I know why they're being kept overseas: ther's no jobs for them here, and they're "too easily radicalized".  I want them home because they don't belong there, period.

B9K9's picture

Who is they? That is, those who, in your words:

will run out of ability to fund the military

The MIC? I wish ZH space monkeys would wake and realize that the first group in line for whatever welfare spending remains will be the military. Even if it requires a coup.

Walk through the logic. Both guns & butter cannot be supported under the current economic model. Even worse than nationalization (the short-term effect) is the longer-term effect of diverting capital away from crucial, yet to be developed/discovered technologies & industries.

This has been extensively modeled - it's not like the guys at RAND are sitting up, going, wow that B9K9 is really insightful. LOL! Thus, one has to give way to the other. Which one is specifically referenced as a direct Constitutional duty? Which group actually has the guns?

Unless we come up with something really damn clever that can produce the necessary economic output required to support another layer of debt that is essential to the fractional reserve (Ponzi) model, this fucker is coming down.

Wake up. Even many of those at ZH are still walking around thinking that things could return to normal. Sure. And the Reich was supposed to last 1,000 years, while the USSR could barely muster 70.

What got us here was 180 degrees opposite to what we are currently doing. Command economies have never worked in the entire history of mankind. We're supposed to think that this time is gonna be different?

Watch the big trends. If something doesn't come up pretty quickly, that noise you hear is a 225 year-old society rolling over and going tits-up.

SWRichmond's picture

for whatever welfare spending remains will be the military.

You seem to think that some will remain.  Then you argue that this fucker is coming down.

So what are you trying to say?  You seem to be saying that you believe the military has the ability to declare martial law and control the entire country while at the same time fighting foreign wars, all while "this fucker is coming down".  Did I get that right?

Anonymous's picture


The only other ZH reader yet that I know gets it.

"I got a war to sell yah." - Obama


naiverealist's picture

Pardon the stupid question, but what does the Fed want to do with all the Treasuries it is buying?

Foreclose on the gold in Fort Knox, buy the Navy/Marines, take over California and Iowa???

What are these private bankers trying to get from the US by buying the Treasuries?

Greyzone's picture

They are trying to keep the system afloat long enough for another "bull market" to resume, so they can suck another liter of blood from their victims.

Anne Rice didn't need to write fictional stories about vampires. All she needed to do was go watch Wall Street in action.