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Indirect Takedown In Today's 2 Year Auction Lowest On Record

Tyler Durden's picture


While generally a rather boring auction, with the 0.245% When Issued coming right on top of the final High Yield, in addition to bringing the US another $35 billion closer to the debt ceiling breach, today's 2 Year auction was remarkable for one more thing: the Indirect Take down of 17.7% was the smallest such award on record, which in turn confirms that last week's trend of collapsing Indirect interest is persisting. Has the Chinese boycott of US paper now moved to all foreigners? Forget the 2 month delayed TIC data, and keep an eye on the weekly updated Fed Custodial holding data - if we see a drop in this week's update for TSY paper, it may be time to start getting concerned.

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Mon, 12/17/2012 - 14:21 | 3071605 vast-dom
vast-dom's picture


Mon, 12/17/2012 - 14:22 | 3071613 ivana
ivana's picture

indirects are dead baby, indirects are dead

Mon, 12/17/2012 - 14:54 | 3071822 fonzannoon
fonzannoon's picture

I feel like I remember this happening last year. Only to realize that everyone was in hibernation for the end of the year. january rolled around and the auctions were business as usual.

Mon, 12/17/2012 - 16:40 | 3072459 Confundido
Confundido's picture

Last year you didn't have the threat of the ECB validating short-term rates from the periphery, via OMTs.

Mon, 12/17/2012 - 21:50 | 3073440 Muppet of the U...
Muppet of the Universe's picture

What is the lamens translation of validating short term rates?


Also I would like to note, that treasuries were due for a fall, and that this fall in indirect bidders likely reflects the current bond, dollar, and index positions.  Indirect bidding will likely pick up, as bonds begin to bounce again.  Will it ever outpace direct bidding again?  Prob not.  Could bonds fall a lot?  Yes.  Does that mean the bond bubble is over?  It's impossible to predict, but I would assume that it isn't in the slightest.

Mon, 12/17/2012 - 14:22 | 3071618 youngman
youngman's picture

Funny thing there are still some indirects buying.....????

Mon, 12/17/2012 - 14:25 | 3071631 LongSoupLine
LongSoupLine's picture

What does any of this have to do with two fucking criminal political idiots having a fucking meeting at the White House?

Mon, 12/17/2012 - 14:34 | 3071691 otto skorzeny
otto skorzeny's picture

you have to be more specific

Mon, 12/17/2012 - 14:35 | 3071694 Atlasshruggedme
Atlasshruggedme's picture

I agree... 

Mon, 12/17/2012 - 14:53 | 3071821 lasvegaspersona
lasvegaspersona's picture

tick tock tick tock tick tock

Mon, 12/17/2012 - 14:29 | 3071653 HD
HD's picture

Concerned? Ben has got this. No need to worry about anything ever again.

Over on CNBC today you'd think they were about to announce a cure for cancer. All blue skies and unicorns for as far as the eye can see.

Mon, 12/17/2012 - 15:41 | 3072110 azzhatter
azzhatter's picture

They had Tepper on early today and after Kernan and that Sorkin asswipe blew him, he started pumping. Squicky was a little miffed because Kernan and Sorkin finished Tepper before she got a chance

Mon, 12/17/2012 - 14:31 | 3071663 KidHorn
KidHorn's picture

We're just moving closer to 100% unsterilized monetization. Nothing to see here that's not expected.

Mon, 12/17/2012 - 15:02 | 3071879 Water Is Wet
Water Is Wet's picture

Closer?  We're there man.

Mon, 12/17/2012 - 14:31 | 3071666 mckee
mckee's picture

Hey.... I've seen "indirect takedown" discussed often here on ZH. I'm really not familiar with the topic.... can someone take a moment to explain what the indirect takedown is and why it matters?


Mon, 12/17/2012 - 14:37 | 3071700 timbo_em
Mon, 12/17/2012 - 14:43 | 3071745 mckee
mckee's picture

Thanks for the link, I appreciate it. So directs are just primary dealers... I assume they meet some criteria to transact directly with the treasury? So why are they purchasing if there is no interest with indirects? Aren't the directs basically brokers between the treasury and market participants? (sorry if I'm asking really basic questions)

Mon, 12/17/2012 - 16:15 | 3072335 TonyCoitus
TonyCoitus's picture

There should be a book for "dummies" like us.  

I think the primary dealers have special privledges for buying the gubments crap debt, tho I'm not sure what they are.  Maybe unlimited coke and hookers?

I must have missed that day of school.


Mon, 12/17/2012 - 21:13 | 3073345 Big Slick
Big Slick's picture

mckee: I think you are incorrect in saying that directs are primary dealers.  Directs are entities with the priviledges of dealing directly with Treasury but without other priviledges that PDs have.

Here's a list of PDs.  For some reason I don't see my brokerage MF Global on there.  Weird, I haven't received a statement from John since Halloween 2011. Anyone know what happened /sarc/


Bank of Nova Scotia, New York Agency
BMO Capital Markets Corp.
BNP Paribas Securities Corp.
Barclays Capital Inc.
Cantor Fitzgerald & Co.
Citigroup Global Markets Inc.
Credit Suisse Securities (USA) LLC
Daiwa Capital Markets America Inc.
Deutsche Bank Securities Inc.
Goldman, Sachs & Co.
HSBC Securities (USA) Inc.
Jefferies & Company, Inc.
J.P. Morgan Securities LLC
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Mizuho Securities USA Inc.
Morgan Stanley & Co. LLC
Nomura Securities International, Inc.
RBC Capital Markets, LLC
RBS Securities Inc.
SG Americas Securities, LLC
UBS Securities LLC.

Mon, 12/17/2012 - 21:16 | 3073363 Big Slick
Big Slick's picture

mckee see my reply above

Mon, 12/17/2012 - 14:39 | 3071701 otto skorzeny
otto skorzeny's picture

I believe that means that they are USTs that are bought through a direct submitter like the Primary Dealers.

Mon, 12/17/2012 - 14:37 | 3071712 mckee
mckee's picture

My understanding is there are direct (obligated to purchase a quantity) and indirect (true market?). So am I to assume there is basically no mkt for treasuries except for what the Fed is purchasing? i.e. if the Fed were to quit (or reduce) the monetization of treasuries the price would drop and the interest to service the debt would increase?

Mon, 12/17/2012 - 15:20 | 3071994 mckee
mckee's picture

So we're all Greek?.... well, in the financial sense of the word.

Mon, 12/17/2012 - 15:41 | 3072113 azzhatter
azzhatter's picture

you have very good understanding

Mon, 12/17/2012 - 16:42 | 3072214 AmCockerSpaniel
AmCockerSpaniel's picture

This is inflationary, as the Fed prints money out of thin air. The Fed then uses that "new" money to by the Treasuries Bonds (dept). The Treasury then uses that "new" money to pay the country's bills. This "new" money is thus added to the old money in circulation (inflation). The amount of "new" money the Fed has produced, is now so large, that "we the people" can never be taxed enough to bring it down to zero. So all "new" money is "dept forgiven" the moment it is printed. This can go on for ever except when some out side country(s) starts to refuse to take the dollar in payment. Then like a flash, it's game over.

Mon, 12/17/2012 - 21:21 | 3073378 Big Slick
Big Slick's picture

The Fed's buying is, in a way, 'dark' because there is opacity between what the Fed is buying from the PDs and what is being purchased in toto and in public.  Fed does not buy the bills directly.  They buy from a PD after the fact but at times predetermined (probably almost entirely predetermined).  It's money (bond) laundering! - plain and simple.

Mon, 12/17/2012 - 14:50 | 3071684 timbo_em
timbo_em's picture

Didn't Romney tell us that it all would start with a treasury auction that goes pear-shaped?

 ps: Isn't China considered a direct bidder?

Mon, 12/17/2012 - 19:37 | 3073082 Lord Blankcheck
Lord Blankcheck's picture

Yes ,China no longer has to go through the Primary Dealers.I'm not sure how they're being accounted for though.

Mon, 12/17/2012 - 14:36 | 3071702 Madcow
Madcow's picture

in a deflationary collpase, the money supply evaporates.  There is no excess cash to "invest" in anything. There are fewer dollars from "trade surpuls" to put into treasuries - or into anything else.  money is not being invested in treasuries - because the money that used to be invested in treasuries no longer exists.  

the future is default-city.  one by one, all the banks and insurance comapnies and munies and then soverigns will fail.  the "Fed" will have to buy up everything - or else just sit back and watch it all go up in flames - which is the only sane course of action at this point.

Mon, 12/17/2012 - 14:59 | 3071858 lasvegaspersona
lasvegaspersona's picture


you see how it is SUPPOSED to be...

....just watch!!! The Fed will not allow deflation. They will turn every piece of paper that exists into CASH!!!

All pensions....SAVED!!!

All munis....SAVED!!!

All anything of 'value' will be ............................SAVED!!!

This is where the wheelbarrows come in....as credit dries up the fed will produce the cash (which will be born as 'reserves at the Fed')...soon no one trusts anyone and ....BAM...we need wheelbarrows.

Mon, 12/17/2012 - 15:14 | 3071951 NotApplicable
NotApplicable's picture

I can't imagine why he thinks defaults will be allowed, when that ends their game instantly. Instead, one or two will be "allowed" to happen in order to set the stage for rescuing the rest. 2008 was but a warmup for the National Emergency "Buy This!" System.

Until each of us refuse to accept BenniBux in exchange for goods and services there is simply NO mechanism for a default to occur. Instead, we will asymptotically approach the zero value/infinite issuance boundary.

Mon, 12/17/2012 - 16:22 | 3072368 TonyCoitus
TonyCoitus's picture

I thought only the Treasury can print money.  Print in the litteral sense that is.  

Mon, 12/17/2012 - 14:37 | 3071710 Soph
Soph's picture

I can never make sense of these charts. I read the Indirect Bidder Takedown as high 20%, or maybe high 40% depending upon how you read the red bar. How does one get 17.7%?


Clearly I'm chart challenged.

Mon, 12/17/2012 - 14:47 | 3071775 timbo_em
timbo_em's picture

It is only the red bar: So if you look at the left scale, you'll see that the red bar on the very right (december 2012) starts at 28 and ends at 46. The difference (18 or 17.7 to be more precise) is the indirect takedown. And Tyler's message is that on average this red bar became smaller and smaller > less demand from indirect bidders.

Mon, 12/17/2012 - 15:16 | 3071971 NotApplicable
NotApplicable's picture

IMO, this is Benron using different check books in an effort to create an appearance of actual market actors. Perhaps even the mythical "bond vigilantes?"

Mon, 12/17/2012 - 16:07 | 3072285 Soph
Soph's picture

Aha, that makes much more sense. Thanks for taking the time to walk me through this timbo_em, much appreciated!

Mon, 12/17/2012 - 14:53 | 3071817 Pairadimes
Pairadimes's picture

No idea why there are any indirects left.

Game over. Thank you for playing. what are their parting gifts, Johnny?

Mon, 12/17/2012 - 15:01 | 3071870 Dr. Engali
Dr. Engali's picture

Tyler since China has direct access to the treasury how does that impact the indirect figures? Wouldn't their purchases ( if any) fall under the direct bidder?

Mon, 12/17/2012 - 15:05 | 3071899 Schlomo Bergstein
Schlomo Bergstein's picture

I motion we rename indirect bidders to 'ultra-muppets', it would make bond auction articles much more accessible for Zero Hedge readers.

Mon, 12/17/2012 - 15:14 | 3071955 lasvegaspersona
lasvegaspersona's picture

There simply have to be back room conversations discussing the fall of the dollar....yet the veneeer is oh so bright...I feel for those who still trust the government to be on their side...and to think we choose to be governed in this way....I guess this is what happens when critical mass is lost and the people get busy with other things than watching those who would govern.

Mon, 12/17/2012 - 15:28 | 3072038 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

It may be time to start getting concerned.

lol Tyler

I think I'll stick with the advice from a ZH favorite....

I suggest you panic.

Mon, 12/17/2012 - 15:52 | 3072184 vote_libertaria...
vote_libertarian_party's picture

So when does the weekly Fed custodial report come out?

Mon, 12/17/2012 - 16:42 | 3072466 Confundido
Confundido's picture

Is this why the cartel sells paper gold at 8pm ET??? To hurt the Asians for not buying Tsys?

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