Not Even Fed's Premonetization Can Help Today's Weak 30 Year Auction

Tyler Durden's picture

Not even the Fed pre-monetizing yesterday of today's 30 Year reopening auction could do much to improve demand for today's $13 billion sale in long-dated paper. Because if yesterday's 10 Year auction was a testament to demand from Direct and Indirect buyers, today's final auction of the week was anything but.

Moments ago the Treasury sold $13 billion in 30 year paper, in a 29 year, 11 month reopening, of the infamous 912810QZ4 Cusip, and which priced at a high yield of 3.248%, the highest yield since last March's 3.381%, and more importantly 1.5 bps higher than the When Issued 3.233%. The internals explained why the demand in the primary market was just not there: Indirects got 42%, Dealer take down was 51.2%, which mean Direct bidders were allotted just 4.9% of the total. This was the lowest Direct allocation since September of 2009, and in stark contrast to yesterday's surge in 10 Year Direct bidders. Finally, the Bid to Cover came at 2.43, the lowest since August of 2012.

Not unexpectedly, the bond market reaction was swift with a prompt sell off following the news, which however quickly normalized because the last thing the market needs is the realization that without the Fed backstopping the entire curve virtually in perpetuity, there would be absolutely no demand at these prices. Or much lower prices. Which is why after an initial jump in yields, the pricing promptly stabilized even as every Tom, Dick and Harry is urging retail to get out of bonds now. For some reason, retail just refuses to get the message and to put their P&L fate squarely into the hands of Bernanke's indirect hands, because remember: the Fed is buying bonds, not stocks.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
gjp's picture

well they may be buying a few stocks out there on the (not so) sly too, ... Kevin Henry is still reporting for duty so far as I know

Frozen IcQb's picture

There’s no price discovery.

Bid to Cover numbers are meaningless as they do not take into consideration the weighted average yields of all bids including those rejected.


johngaltfla's picture



"All your bid belong to us."



DblAjent's picture

remember: the Fed is buying bonds, not stocks.

Then who is buying all the stocks?

Spaceman Spiff's picture

Ex-bondbuyers who need a better yield?

NotApplicable's picture

I take it you haven't looked at volume lately. The lower the volume, the easier the levitation.

Cognitive Dissonance's picture

Why would anyone purchase 30 year US Treasury paper at 3.248%? Why would anyone purchase 30 year US Treasury paper.........period?

<Sorry, I guess there still are some greater fools out there after all. Everyone in, the cesspool water is just fine.>

madbraz's picture

For a 20% gain in the next 3 months as the yield goes back to 2.6%, much like in 2012.



Cognitive Dissonance's picture

So why would anyone buy 30 year US Treasuries at 2.6% from you after you reap your 20% gain in 3 months?

Better put the /sarc tag here.

Seasmoke's picture

30 years ????? They should be worrying about 30 days at this point.

Lord Of Finance's picture

House flippers turned bond flippers. Soon, their wives will need to raise cash as hired strippers.


   We gold dippers won't be giving any "donations" to those bond strippers.

Cult_of_Reason's picture

So technically Bernanke was not lying under oath about debt monetization.

He is only premonetizing and not monetizing US debt.


SilverMaples's picture

It's not debt if it doesn't exist yet!

Cult_of_Reason's picture

Bernanke: “Monetizing the debt means using money creation as a permanent source of financing for government spending” ...  “In contrast, we are acquiring Treasury securities on the open market and only on a temporary basis, with the goal of supporting the economic recovery through lower interest rates. At the appropriate time, the Federal Reserve will gradually sell these securities or let them mature, as needed, to return its balance sheet to a more normal size.”

In other words, according to Bernanke, "transitory" debt monetization is not a debt "monetization" at all.

SeattleBruce's picture

"the Federal Reserve will gradually sell these securities or let them mature, as needed, to return its balance sheet to a more normal size.”

Huh!  And when would this gradual sale start to happen Mr. Burnyankme - right now it's buying bonds at a TRILLLLLLION bucks a year as far as the eye can see...wonder when they'll start 'gradually' selling...LOL....yeah, that line is worth the same as that swampland in Florida we always hear about.

e m m's picture

Are they even allowed to think this paper is expensive at 96 yen? In the post November 16 market (I consider Boehner's 'fiscal cliff talks progressing well' to be the big bang), USD/JPY is up about 18% and stocks are up about 15%. What will happen to the all time highs, if some try to vote for cheaper paper in yen terms but at the same time some others don't want yields to rise? What is now with Kuroda's 'ermegency easing'? It might be time for some fresh credit!

max2205's picture

Looks like the fed came in to prop up the cash bond

Stocks up bonds up.  Cats sleeping with dogs

SheepDog-One's picture

That's OK, stawks still fine and we know that's all that matters.

NotApplicable's picture

An AAPL a day keeps the pensions in play.

combatsnoopy's picture

OPEC cares about the currency war. 


The Organization of Petroleum Exporting Countries will increase its shipments this month, tanker tracker Oil Movements said. OPEC will export 23.75 million barrels a day in the four weeks to March 30, up 300,000 barrels from the previous period, the Halifax, England-based researcher said today in an e-mailed report. The figures exclude Angola and Ecuador.

Electronic trading volume on the Nymex was 370,176 contracts as of 3:19 p.m. It totaled 723,353 contracts yesterday, 33 percent above the three-month average. Open interest was 1.71 million contracts.


yogibear's picture

It doesn't matter, Bubble Bernanke can print up a few trillion Benny dollars and buy up all the debt.

Then make it vanish.

That's why Obama said deficits don't matter.

China and Saudi Arabia are a bunch of chumps for holding onto US debt. Recycle the US dollars into toilet paper eventually.