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Treasury Closes Issuance Week With Strong 7 Year Auction; Direct Takedown Second Highest Ever

Tyler Durden's picture




 

Tuesday's weak 2 Year bond auction is now a distant memory, and following yesterday's strong 5 Year it was not surprising to see a very strong pick up in demand for the just concluded 7 Year auction. On the surface, the auction was very strong with the high yield printing at 1.496%, stopping through the 1.515% When Issued, if still the highest yield since March 2012.

The internals were also very strong, with the Bid to Cover closing at 2.70, in line with last month's 2.71, and above the TTM average of 2.68. More importantly, Direct demands soared with 20.68% of the takedown going to Direct bidders, the second highest ever in this series, and lower only to December's 23.11%. Indirects were no slouch either, with a final allotment of 40.84%, leaving just 38.48% for Dealers, the lowest take down for 2013.

So with very strong primary market demand along the belly, it is safe to say all rumors of a blow up in the US bond market are greatly exaggerated, and at least for now, any fears of a great "vortexing" can be put to rest. Remember: TSYs still continue to be the primary source of repoable collateral and for the time being at least, everyone still wants them.

 

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Thu, 05/30/2013 - 13:19 | 3610858 slaughterer
slaughterer's picture

TBT sold now.  All Hail Mighty Ben.

Thu, 05/30/2013 - 13:33 | 3610905 Son of Loki
Son of Loki's picture

With that robust yield of 1.4% I can now upgrade my sardines to the King Oscar Brand and live it up!

 

BOOOOYYAAAHHH.

 

[of course, I'll still have to foot it to work and cut back on the air-con and skip lunch several days a week]

Thu, 05/30/2013 - 13:19 | 3610864 fonzannoon
fonzannoon's picture

I guess the NFP report will be shitty. 

Thu, 05/30/2013 - 13:23 | 3610875 doggis
doggis's picture

IS IT ME - OR DOES ANYONE NOTICE THAT WHEN THE YEN DROPS - ES AND SPX UP ----- BUT WHEN THE THE YEN RISES - ES AND SPX UP!!!!!! 

HUH?!!!!!

YEN RETRACED ALL ITS MOVE FROM THE REUTERS STORY THIS MORNING - BUT THE ES AND SPX HAS REMAINED ELVEATED - WTF????

Thu, 05/30/2013 - 13:25 | 3610879 Dr. Engali
Dr. Engali's picture

The ten year continues it's slide back down towards 2%.

Thu, 05/30/2013 - 13:28 | 3610898 fonzannoon
fonzannoon's picture

the fake economic data recently is weak So Bernanke will not taper...so buy treasuries, they pay interest...unlike....

 

Thu, 05/30/2013 - 13:32 | 3610902 Dr. Engali
Dr. Engali's picture

I little more market turmoil in Japan and we will be headed back down to 1.6%.and the Bernank can pat himself n the back.

Thu, 05/30/2013 - 13:33 | 3610908 Catullus
Catullus's picture

So now that they scared some money back into treasuries can we resume the equity rally? Or do we need Moar treasuries to lever off of to fuel the rally?

Long live the rally!

Thu, 05/30/2013 - 13:33 | 3610910 l1b3rty
l1b3rty's picture

going to need to hit up the Epson B2B unit and order a bunch of new toners! toners are more expensive these days...

http://goldsilverbitcoin.com 

Thu, 05/30/2013 - 14:03 | 3610999 youngman
youngman's picture

Amazing to me the demand is still there......

Thu, 05/30/2013 - 15:32 | 3611285 Solon the Destroyer
Solon the Destroyer's picture

Why?

-Cleanest dirty shirt in a world of filth

-Front-running the Fed provides guaranteed capital gains

-needed for repo collateral (etc)

After 33 years of this happening, I don't understand the amazement.  The price is likely to go up even from here.

Thu, 05/30/2013 - 14:05 | 3611011 Spitzer
Spitzer's picture

Strong demand. Yet the Fed is the biggest owner...

Thu, 05/30/2013 - 14:50 | 3611173 Dan Conway
Dan Conway's picture

I don't like what the fed is doing but today's auction makes sense to me.  If the deficit is going to be small this summer there will be less treasuries to buy so this seems like a good time to buy after the little run-up in interest rates in the last week.  Besides, ben will buy all of the bonds so you don't really need to worry about a loss on the purchase.  And isn't the 10year yield above the S&P dividend yield?  Why buy stocks at this level. 

Since the fed controls the treasuries and mortgage markets doesn't it stand to reason that if there is a blow-up in interest rates we would see it in the junk bond or some other market?   I know I wouldn't be investing my own money in junk bonds right now but I also recognize most investors of junk bonds don't use their own money. 

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