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Record Direct Bidder Scramble For Safety Of Today's 2 Year Bond Auction
They may yield nothing (technically 0.295% nominal yield), and they may be still sold by the Fed, but today's 2 Year bond auction had a blistering metric that showed that something is very much unwell with the market. Coming at a Bid to Cover of 4.02, broad demand for today's $35 billion in 2 years was the second highest only below November 2011's 4.07. What happened on November 21, 2011? Well, the world was ending for one, or if not the entire world, then certainly Europe which for those who remember, had to be rescued one short week later courtesy of a coordinated global central bank intervention when the Fed and Europe not only renewed their FX swaps, but lowered the rate paid to OIS+50. So do the bondholders know something about today's market plunge that is not being said? We will find out soon.
What else happened today? Nothing short of an unprecedented surge in Direct Bid take down, which soared to an all time high for the series, closing at a whopping 35.41% of the total, more than either Indirects or Primary Dealers! Who was it: Pimco or China? The rumors are about to start.
The direct result of the surge in Direct Bidders is that Primary Dealers, or the traditional backstop behind every auction, tendered a massive $97.6 billion which Accepting only $9.8 billion, or a 10% hit rate. As the chart below shows the dealer Hit Rate was the lowest since 2006, or well after the advent of the "New Norma" when every move in the markets is pre-cleared with Ben Bernanke.
And to think it only took a modest 20 point drop in the ES to expose all the nasty dirt in the bond market. One wonder what we would discover if, as is increasingly probable, we get another Flash Crash, and just how the Fed will telegraph coming inflation if everyone continues scrambling to the Fed frontrunning comfort of the long Treasury end...
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risk off bitchez
Yes, time to move to such safe assets as dollars and yen.
It's almost 3 pm....time for the end of day rally to start
Who will start it the PPT cause no one else really wants into that mess
Companies Are Sitting on More Cash Than Ever Before
http://www.cnbc.com/id/49519419
Lead lifeboats on the Titanic.
quick run into the burning house RUN!!
Can I go back to bus and get my camera first?
more money being lead to slaughter. So this is what the death of a currency looks like? Amazing.
The 10y as of just now. Just about closed up.
http://blog.quantsig.net/2012/10/23/10-year-3/
EDIT:
Also this cycle looks different to me in that there doesn't seem to be as much of a rush in treasuries during these downlegs in equity. This is becoming less and less an aberration to me.
Spanish 2 year notes offer almost 3.00% - guessing the auctioneer didn't get the libor rig memo.
Financial Bear ETFs are outflowing like a fat guy "wet flatulating" the culmination of some "shrimp tomain" he imbibed yesterday at the all you can eat day quasi asian buffet. Meanwhile, a lonely dude in an NYC walk up finally got an answer he could live to a question that has been dogging him his most of his life: "Who invented the 'coat hanger', Mr.Coat or Mr. Hanger?". His 2ed cousin, who also be his pappy, suggested "they both did". Now lonely guy has migrated to more lucrative fields of philosophical enterprise. His current project, "What is the underlying thesis of the tune "Low Rider".
Back to the universe of high phynance maniacs and market fraud and rig gig the retail schmuck shtick, Forbes, and others, are reporting large outflows from bear S&P finance ETFs. Recalling - daze back - learning that the near absolute majority holder of a finance bear paper, aka SKF, is a bank, UBS. Always seems, don't it. when the stage is set for da payoff, some kind of little short squeeze pops up like a terd ball that didn't hit the sewer on the first flush.
If ya buying junk - does yield correlate to the assets "junkyness"?
bond market is huge and bond traders are generally considered much more astute traders than equities traders.
the downside is now the fed will have more funs to pump the /es, up 8 points off the spike low on low-volume.
I do not think it's a coincidence what has been happening in the markets this day. Chances are you have some news in the next few hours or days. Intervention in the market is so obvious, I think it's better not to participate in the market for a few days.
Painting demand is easy if you run a lemonade stand. Buy your own lemonade.
Low volume day... the average volume keeps sinking... just a few days ago the average was 140m
Easy peasy for some algo' or govt. agency to turn it back up straight to close... watch for it... it's practicaly guaranteed with the election so close.
Gas prices falling record amounts too... how convenient.
I was wondering where all that Europe selloff money went.
"So do the bondholders know something about today's market plunge that is not being said?"
No. The bond holders are the dumbest class of investors. Return free risk.
Can someone explain, Who's "Norma?"
Nowadays, every class of paper investor takes their turn at being dumbest.
I have to say bonds win the "dummy" prize. At least for other investments there is a hope and prayer to achieve a gain.
Bonds are an automatic loss from the start because inflation is higher than the yield. And, to add to that, with prices at the ceiling there is only one way for bond prices to go. Bonds offer no return but yet hold tremendous risk.
You may be right. IMHO, the yield curve will continue to flatten. But I'm willing to change my mind any second now.
That's all that everybody is doing is looking to trade these things thinking the price will go just a little wee bit higher. Nobody's actually looking to hold bonds through maturity, which is very, very dangerous.
Greenspan on CNBC with LIESman: "M2 divided by Capacity close to what it was in 1925."
Oooops.
Open the floodgates then. I dare them. It would hurt them alot more than any of the 99%.
Coming up on the 2:20 PPT Pump...............
Japan
Deflationiscoming!!!!!!!!!!!!!!!
Run for the hills!
Buy Bonds and save dollars!
Aaaaggggghhhhhhhh!!!!!!!!!
Safety...in 2 year paper...hahahahahahahahahahahahahahahahahahahahahahahahahahahahah!!!!!!
Bernanke Wins...Bernanke Wins...Bernanke Wins the World Series of Printing!!!!
Probably just a coordinated selloff by all the rich fucks trying to get Romney into office knowing full well most of the cows are too fucking stupid to decide until the last minute who to vote for. LOL.
I think the market was not happy at all with Romney's diatribe. If he gets in, look out markets, look out world, escalation of global hostilities, here we come...
I wonder if the hidden news that many speculate the market is reacting too is related to the firing of CitiBank CEO Vikram Pandit and COO John Havens . I wonder if there is a black swan from citi coming in for a landing. I'm sure we'll all find out soon enough.
The flight to safety will end up badly. This is an overcrowded trade.
Big crowd, small exit.
http://www.financialsense.com/contributors/antony-mueller/quantitative-easing-folly-or-method
What is central banking good for?
What, so we must ask, is central banking good for when it is not even able to guarantee a stable price level?
Why keep a quasi-dictatorial creature within the government body that operates largely outside of public control? Why hold on to an institution that more often than not has failed to provide full employment and price level stability? By these criteria the Fed has indeed been a failure. What then, we must ask is the true mission of central banking as one cannot calibrate accurately the effects of monetary policy on the real economy and price level? The answer is provided by the historical origin of central banking. As Rothbard and other authors such as more recently Lawrence White have shown, central banking grew out from the cooperation between the state and the big players of the banking sector. The deal that was struck said that the big banks will finance government and that the government won’t let the big banks go bankrupt. For that purpose a lender of the last resort was installed in the form of a central bank which would obtain the privilege by the government to produce unlimited amounts of fiduciary money.
Historically the scope of discretion was restricted by the gold standard at first, yet over time the various constraints have been removed step by step beginning with World War I. With the so-called Smithsonian agreement of 1971 the last anchor for the US dollar fell. At the day when President Nixon fully abandoned what was still left of the gold standard, the starting gun was fired for the escalation of the financial sector to grow into its current gargantuan proportions. In tandem with the expansion of the financial sector, government grew its public debt into its current colossal dimensions.
While central banks are effective as lender of the last resort and thereby to safeguard the big players of the financial system from going bankrupt, they are not only incapable of promoting economic growth, employment and price level stability, they are in fact the major perpetrators of the business cycle. Always under pressure to set the interest rate as low as possible, central banks provoke artificial booms which inevitably must result in a bust. The big players in the financial market can profit on the way up without fear about the downturn as they can rely on the central bank to bail them out.
In an academic paper Bernanke (2001) and his co-author argued explicitly that central bankers should not try to prick asset bubbles but stand ready to bail out banks and financial institutions when the bubble bursts. In his speech as a Governor of the US central bank on “Monetary Policy and the Stock Market”, Bernanke declared in 2003: “The ultimate objective of monetary policymakers is to promote the health of the U.S. economy by pursuing our mandated goals of price stability and maximum sustainable output and employment. However … monetary policy actions have their most direct and immediate effects on the broader financial markets, including the stock market, government and corporate bond markets, mortgage markets, markets for consumer credit, foreign exchange markets, and many others.” The message was well understood. The big players in the financial market could rest assured that their central bank would bail them out when a new episode of the lending spree began - the housing bubble. Operating as bailout machinery for the financial system, the US central bank has thoroughly infected the monetary system with moral hazard.
A US treasury is not a no risk play in fact, it is more risky then owning any Dow stock. printing money to pay the interest is nothing more than a ponzi scheme and the clowns all know it.