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Weak 3 Year Aution Sees Lowest Indirect Take Down Since 2007 Despite Record Low Yield

Tyler Durden's picture





 

A rather curious result in today's just completed 3 Year $32 billion bond auction, which concluded on surprisingly weak terms, despite the High Yield coming at 0.327% or precisely where the When Issued expected it would, which also happens to be the lowest yield in the history of the auction. So far so good - where things got thorny is in the internals, first the Bid to Cover which printed at a surprisingly low 3.356, the lowest since February 2012, but a bigger surprise was the Indirect Take Down, which as validated by the recent trend, just dipped to 21.9% of the issue, the lowest Indirect Takedown since 2007! It also saw the Direct allocation surpassing the Indirect for the first time in history. Just as surprising is that the Indirect tender into the auction was a meager $9 billion, leading to a very high 77.3% hit rate. Obviously America's foreign lenders have better thing to do than to lock up cash with Uncle Sam even for 3 years, despite Ben's guarantee that there will be no volatility in the throutg "mid-2015." Or perhaps due to. Finally, it also means that ever more Fed monetization will have to take place to rotate bonds from PDs back to the Fed, and also means that with the Fed already monetizing 100% of all long-dated issuance, he will have to move ever further left.

 

Note however: the last time indirect take-up was this low, it marked the very top of the S&P 500

 

 


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Tue, 12/11/2012 - 14:22 | Link to Comment TruthInSunshine
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Bernanke Lies Under Oath re: Monetizing Debt - YouTube

 

Forward, Komrades at The Federal Reserve!

Tue, 12/11/2012 - 14:29 | Link to Comment NotApplicable
NotApplicable's picture

At this point I'm guessing that The Bernank is just using a handful of different checkbooks.

Tue, 12/11/2012 - 14:38 | Link to Comment stocktivity
stocktivity's picture

The Dow up more than 100 ...awaiting word from the Bernank of more QE....same Bullshit! He'll supply what the market wants eventually by printing more money out of thin air. How the hell did this man get this kind of power?

Tue, 12/11/2012 - 16:24 | Link to Comment TruthInSunshine
TruthInSunshine's picture

If they conjure/print more fiat from thin air, that merely kills the actual, real economy more quickly. This "virtuous-less circle" is beyond refutation at this point.

So they probably will.

Tue, 12/11/2012 - 15:33 | Link to Comment timbo_em
timbo_em's picture

His whole statement is very entertaining. In the beginning, he more or less confirms that he plans to create a student loan and a auto loan bubble. That dude is totally crazy.

 

http://www.c-span.org/Events/House-Budget-Cmte-Hearing-with-Federal-Reserve-Chairman-Ben-Bernanke/13978/

Tue, 12/11/2012 - 14:19 | Link to Comment Mr Lennon Hendrix
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Bernanke and Dimon love themselves some record low yields haha.

Tue, 12/11/2012 - 14:20 | Link to Comment fonzannoon
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who wants to own treasuries here with the fiscal cliff resolution opening the door for equities to go to the moon. There is a chance the 10 year could sell off and the yield could skyrocket. Yup I am talking like 1.75%ish. Thats nosebleed. Of course at that point it would only be prudent to lock in those yields as they will have to come down.

Tue, 12/11/2012 - 14:30 | Link to Comment NotApplicable
NotApplicable's picture

Well, it'll never sell of for more than "15 minutes, guaranteed."

Tue, 12/11/2012 - 14:21 | Link to Comment Caviar Emptor
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The Con-fidence game is unravelling

Tue, 12/11/2012 - 14:25 | Link to Comment fonzannoon
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unravelling? These guys are hitting on all cylinders. equities grinding higher and yields dropping lower and gold caught in a headlock taking gut punches. Even these guys have to be sitting there saying "holy shit" this is going well.

Tue, 12/11/2012 - 14:33 | Link to Comment Dr. Engali
Dr. Engali's picture

If you look at it there has been a lot of action, but nothing is going anywhere. It's like nothing can be allowed to make a significant move in either direction.

Tue, 12/11/2012 - 14:41 | Link to Comment fonzannoon
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that is very true. everything is frozen. it's amazing. other than this manufactured fiscal cliff garbage there has been an absence of a real crisis. it seems as long as bernak can counteract deleveraging (which i have a hard time with) with an equal amount of printing this will go on and on. It is so obvious a cable is going to snap and decapitate everyone in it's path at some point but everyone is getting tired of ducking.

Tue, 12/11/2012 - 18:45 | Link to Comment obejoyful
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Awesome, I will have to remember that one.

It is so obvious a cable is going to snap and decapitate everyone in it's path at some point but everyone is getting tired of ducking.

Tue, 12/11/2012 - 14:41 | Link to Comment Poor Grogman
Poor Grogman's picture

If they make the markets boring enough they can pretend that everything is fine again.

Tue, 12/11/2012 - 14:44 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Nobody wants to play on the short end...as in any pre-recession

Tue, 12/11/2012 - 14:30 | Link to Comment NotApplicable
NotApplicable's picture

Good luck untangling it all!

Tue, 12/11/2012 - 14:31 | Link to Comment fonzannoon
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who said they had any intention of that?

Poof

Tue, 12/11/2012 - 14:37 | Link to Comment NotApplicable
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Not them, the "lucky" survivors like Caviar.

Tue, 12/11/2012 - 14:27 | Link to Comment tooriskytoinvest
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If 21/12/2012 Don't Get You Be Sure To Enjoy Civilization's Death Spiral. Coming To An Economy Near You. Kotlikoff Estimates The True Fiscal Gap Is $211 Trillion!

http://investmentwatchblog.com/if-21122012-dont-get-you-be-sure-to-enjoy-civilizations-death-spiral-coming-to-an-economy-near-you-kotlikoff-estimates-the-true-fiscal-gap-is-211-trillion/

Tue, 12/11/2012 - 14:31 | Link to Comment NotApplicable
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"Seed Corn: It's what's for dinner."

Tue, 12/11/2012 - 15:22 | Link to Comment JustObserving
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He has updated it to $222 trillion for 2012

The U.S. fiscal gap, calculated (by us) using the Congressional Budget Office’s realistic long-term budget forecast -- the Alternative Fiscal Scenario -- is now $222 trillion. Last year, it was $211 trillion. The $11 trillion difference -- this year’s true federal deficit -- is 10 times larger than the official deficit and roughly as large as the entire stock of official debt in public hands.

http://www.bloomberg.com/news/2012-08-08/blink-u-s-debt-just-grew-by-11-...

Tue, 12/11/2012 - 14:38 | Link to Comment earleflorida
earleflorida's picture

'talk is cheap... that's why the sheeple eat it up-- like a tweekie soaking up a free obie gravy train boat'

cheap is good-- expensive is bad... now close your eyes, and let your mind go to sleep counting your blessings 

Tue, 12/11/2012 - 14:40 | Link to Comment Confundido
Confundido's picture

But, but....what is the IMPLIED rate telling us???

Tue, 12/11/2012 - 14:45 | Link to Comment Sutton
Sutton's picture

Just buy the bonds directly from the Treasury, Ben.

Tue, 12/11/2012 - 17:59 | Link to Comment slightlyskeptical
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That exactly what is occurring. Once they own enough it will be reboot time and debt ceilings and fiscal cliffs will be but a distant memory.

Tue, 12/11/2012 - 14:58 | Link to Comment vote_libertaria...
vote_libertarian_party's picture

Everybody forgets the Econ 101 lesson of supply and demand.

 

Eventually all of this supply is going to crush bond prices.  Always has, always will (although I am getting really sick of waiting).

Tue, 12/11/2012 - 15:06 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Yes, but ben can "fix it in fifteen minutes".  go ahead motherfucker, raise rates.  I double dog dare you. (channeling the negotiating techniques of hank paulson).

Tue, 12/11/2012 - 15:11 | Link to Comment Galactic Superwave
Galactic Superwave's picture

Anticipation of the bond prices getting crushed is probably why the market is going up today since the money will flow from bonds to equities. But, this so-called smart money may have anticipated the bond reversal way too soon. Based on previous Zero Hedge articles, Bernake must print for the foreseeable future to just keep the status quo. But, there is always the unknown event that can throw a wrench into these ill conceived plans.

Tue, 12/11/2012 - 15:25 | Link to Comment fonzannoon
fonzannoon's picture

The idea that when the bond market gets crushed, people will go running to equities makes absolutely zero sense to me. The money in bonds right now got smashed up in equities once or twice. If it catches a beating in bonds no one will run back to equities.

If anything you will see people in Bonds getting out altogether and people in equites start running to bonds thinking they are locking in some decent yields. That is if it is orderly. More likely you turn on CNBC and the screen is black with a "be back in five minutes" post it on Cramers desk.

Tue, 12/11/2012 - 15:03 | Link to Comment dcj98gst
dcj98gst's picture

Debt maturing in the next few years:
year - Principle - interest 

2013 - $1,262B - $196B
2014 - $1,346B - $178B
2015 - $987 - $158B

Wait till 2014.  The bonds will collapse

Tue, 12/11/2012 - 15:08 | Link to Comment LawsofPhysics
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I will be truly impressed if we make it to 2014.

Tue, 12/11/2012 - 15:09 | Link to Comment Dr. Engali
Dr. Engali's picture

I'm impressed we made it this far. The sheep have been lulled back to sleep. The matrix is safe.....for now.

Tue, 12/11/2012 - 15:41 | Link to Comment hannah
hannah's picture

this is like watching the tv show 'lost' and getting to that point that you realize the writers never had an ending so it is all made up bullshit and isnt worth watching any longer.....everything is just short term meaningless propping up of a story with no end...LOL

Tue, 12/11/2012 - 15:44 | Link to Comment Jake88
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Does anyone know what an indirect take down is?

Tue, 12/11/2012 - 18:01 | Link to Comment klockwerks
klockwerks's picture

Jake, I believe that is when the fed ends up the end buyer. No one else wants to buy our debt so we have to buy it ourselves.

Tue, 12/11/2012 - 17:20 | Link to Comment slightlyskeptical
slightlyskeptical's picture

I wish they would just come clean with the real plan. Have the Fed buy every mortgage, credit card, student loan debt and every treasury note/bond. Once they have attained them all, forgive the treasury debt and refinance all the housing loans. That has to be the plan because nothing else has a chance of working unless delaying the inevitable is considered to be working. Just $3-4 trillion left to buy before this happens.

Tue, 12/11/2012 - 17:20 | Link to Comment slightlyskeptical
slightlyskeptical's picture

I wish they would just come clean with the real plan. Have the Fed buy every mortgage, credit card, student loan debt and every treasury note/bond. Once they have attained them all, forgive the treasury debt and refinance all the housing loans. That has to be the plan because nothing else has a chance of working unless delaying the inevitable is considered to be working. Just $3-4 trillion left to buy before this happens.

Tue, 12/11/2012 - 19:18 | Link to Comment supafuckinmingster
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Weak 3 Year Aution Sees Lowest Indirect Take Down Since 2007 Despite Record Low Yield

 

Can anyone tell me what in the name of blue fuck a "Weak 3 Year Aution" is?

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