Direct Award In $35 Billion 5 Year Auction Soars To Record High

Tyler Durden's picture

The recent surge in Direct Bidder records continues, and in the aftermath of yesterday's 2 Year which saw a record low Indirect takedown, the historic surge in the Direct award in today's 5 Year was almost anticlimactic. The auction in broad strokes: Treasury sold $35 billion in 5 year bonds at a yield of 0.769%, just wide of the When Issued of 0.765%, and at a 2.72 Bid to Cover, not tragic, but well below the TTM average of 2.88, and as the chart below shows, it appear that an inflection point in the BTC for the series life was hit about a year ago, and the interest in the bonds is now declining. The internals were ugly: the Indirect take down was a low 32.4%, with a huge Hit Rate of 89.8% based on a $11.3 billion award out of $12.6 billion in offeres tendered. This was the lowest Indirect take down since November 2010. Primary Dealers were awarded 37.2%, the lowest since April 2010, which logically meant that Directs have to take up the slack, and sure enough they did, with an award of 30.%, the highest on record. Is there some major shift in the underlying dynamics for US paper based on these recent results? You bet. What is said shift? We hope to find out soon enough.

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Big Slick's picture

We're on Express Elevator to Hell!  GOING DOWN!!!

Spot Ben Bernanke in this 9 second clip:

boogerbently's picture

Every auction we buy our own debt SHOULD be a major spike for gold.

Manthong's picture

Should.. except if they use the fake money to position against paper gold.

Thomas's picture

Exactly. Print money to cover losses on paper gold shorts. 

Mr Lennon Hendrix's picture

The PWG is short gold, the Fed leases rehypothecated gold reserves (on loan from the UST), the PDs short gold naked via GLD, they are all shorting the miners.....and why would they do something like this?

Gold acts as the chief investment for all banks central and private and so they have been making sure to get as much as possible over the last few years and don't want to blow the lid off of it until their coffers are full.  This means they keep a lid on it and at the same time they keep a lid on oil prices because precious metals trade with oil and currencies (especially the dollar) trade inversely oil.

They kill two birds with one stone this way.

Dr Benway's picture

What about crossholdings? Countries accounting of gold at hand can include gold lent. So if country A has 50 tons actual gold and 50 tons lent to B, and country B has 50 tons actual gold and 50 lent to A, each of them can claim 100 tons gold at hand in their accounting.

Mr Lennon Hendrix's picture

"Print" dollars, buy USTs, make leveraged bets shorting SLV and GLD, then flip USTs T+1 to JPM after buying MBS with more freshly "printed" dollars, then JPM squeezes SLV and GLD harder.

All in a day's work by your Central Planners!

redeals's picture

Oh the games we play with bad paper.

Anonymous peon's picture

You borrow till there's no one left to borrow from, then you print dollars till no one will take them.

fonzannoon's picture

I feel like this exact scenario played out at the end of last year. Nothing changed.

Dr Benway's picture

In the zombie world of the undead nothing ever changes

LongSoupLine's picture

$10,000 loaf of fucking bread coming soon to a store near you.


Fuck you Bernanke.

NoDebt's picture

Looks good to me.  It still adds up to 100%.  Carry on.


Mr Lennon Hendrix's picture

Bernanke is now doubling down on his balance sheet. 

I wonder if he is doubling down on his gold leases too?

Bam_Man's picture

The idea is to buy Treasuries today at the lowest possible price, then sell to Uncle Shalom next month at a much higher price. Pretty simple and it sure looks like that's what is happening here.

chdwlch1's picture

Don't the Chinese have direct access to the Treasury market now?  I think they were allowed access last year in June if my memory is correct.  That might explain the higher Direct takedowns....

Cult_of_Reason's picture

We will never find out who it is.

GLG20's picture

I don't know if anyone has mentioned this yet during these auction discussions but remember China applied for and received direct bidder entry into Tsy auctions, taking them off the indirect bidder side. That's a pretty big prospective bidder who isnt passing bid sheets through PDs now.

hedgeless_horseman's picture



We mock what we don't understand.

GLG20's picture

Well the Chinese were only using a simple polyphonetically-grouped twenty-square-digit key transposed from boustrophedonic form with multiple nulls.

stocktivity's picture

Don't mean to correct you but don't you mean eighteen- square?

SafelyGraze's picture

don't mean to correct you but don't you mean boustrophedon?

(it's already adjectival)


LawsofPhysics's picture

So, they are "chasing yield" at 1.7 % on ten year and less that 1% on the 5 year?  Doesn't seem all that smart to me.  I think winston has nailed it.

Winston Churchill's picture

The PBOC was given PD status to cover their NON buying.

Everything has the opposite meaning  in beaurocratese.

Defense = war.

Labor = unemployment.

etc etc

Nothing To See Here's picture

10Y yield rising fast for 2nd day in a row. +8% since yesterday morning... After the record lows of this summer, now higher than end of 2011...

I smell something happening under the radar...

Winston Churchill's picture

The PD's smell it as well.If they are turning down a guaranteed profit front running the

FedRes,its got to be something big.

scatterbrains's picture

Gold is telling us a bunch of middle class fat fucks are about to be harvested via the cliff.. and why not ? Both parties can dump the problems on the feds lap and hope to convince the public it's the other guys fault..  what's the fed gonna do ? stop printing ? lol

SheepDog-One's picture

Oh I sure hope that's what's in store next....bunch of pooh-poohing pensioners and 401K holders just get cornholed totaly one morning!

LawsofPhysics's picture

There can only be buying, all selling will be halted --  NYSE implementing "kill switch" ---

SheepDog-One's picture

I'm sure glad I have nothing to do with any of it....and thats just how it will go down too, suddenly mom and pops pension and 401K funds will be taken over by the FED, 'Corzined' if you will, and not be able to access it under all kinds of 'conditions' such as 'You're sick, or overweight or you smoke, so until you correct that you're too 'high risk' for our money'.

The writing is on the wall. Man is this going to be great to watch.

Mr Lennon Hendrix's picture

Unless you are selling silver, then sell away.

SheepDog-One's picture

Gee only ramped the DOW up +100 today? Why not just ramhole it up 400 or 500 today who would say anything? Why not just prop the DOW up +500 every morning in fact...what is something stopping them? Would that be TOO 'outrageous' or something?

Mr Lennon Hendrix's picture

You are witnessing the hyperinflation of all currencies Sheepdog.

So yes, anything is possible.

fonzannoon's picture

I gotta call it like I see it. I am witnessing sheer awesomness on the part of TPTB. Stocks rising nicely. The dollar selling off a bit and gold getting gut punched again. Yields climbing a bit but well within limits. I wonder if they have it in them to get gold red for the year. It seems like they can do anything they want.

I have no doubt they will lose control of this at some point. But right now they are on fire.

SheepDog-One's picture

Gotta keep mom and pops calmed until the FED seizes all those assets one morning. 

Nothing To See Here's picture

I have got to say I feel like you do. They got things under control right now. That is, until they don't. But it could last a while. Took 80 years for USSR to crumble, and I'm not sure their new system really is an improvement...

SheepDog-One's picture

Yea but this hasn't just started TODAY you know....look at things like the Emergency Banking Act of 1933....this has already been imploding for many decades.

Mr Lennon Hendrix's picture

You are witnessing the hyperinflation of all currencies Sheepdog.

So yes, anything is possible.

Cult_of_Reason's picture

Whoever was marking up the market this morning (most likely it was Larry Fink's joint algo) used a Birinyi's ruler pointed at 60 degrees angle.

muppet_master's picture

record high bidding

on kenyanomics-"treasury"-toilet paper !! yesterday poor showing, but "fed" showed up say its all clear in the ponzi scheme...

just like those italian and spanish bonds..."good bidding" because EFSF showed up...

don't believe the hype..... spx TOP has been reached TODAY @ 1447 = SELL NOW !!!!

drmfh's picture

I've looked up treasury auctions and don't understand the significance of the terms "indirects", "directs" and "institutional" as they relate to who is doing the buying.

Could a kind soul here on ZH please either explains this to me or send me a link to a site that does a good job of it?

Thanks so much. I think that the world has gotten a little crazy when only the Federal Reserve wants to buy our national debt and they get to put the zeros in the computers to do it! Is any one out there with a brain paying attention????

Scary stuff.

drmfh's picture

Thanks very much. Just what I was looking for! You are a gentlemen (I assume) and a scholar!

Madcow's picture

interest rates can continue to fall by 50% - once a quarter if necessary - basically forever. 

if rates go from .000005 to .0000025 - that's a 100% profit for anyone who buys - assuming there is no default or currency crisis.

LawsofPhysics's picture

"assuming there is no default or currency crisis."


When did bonds become so risky?  I think they will let rates creep up a bit first there is some room here.  Try to put some fear back into the political puppets before your scenario plays out.  Hell, why can't rates go negative, some already have.

Michelle's picture

Only the Fed can take on the risk of an impending bond bear....happening with gold, too.

"If bond yields begin to rise alongside homebuilder and bank stocks, a major asset allocation shift would be warranted, in our view.”

Read more: BofA Outlines 2013: The Great Rotation from Bonds to Stocks - 24/7 Wall St.