Bonds Burned By Ugly, Tailing 30 Year Auction

Tyler Durden's picture

Following the 3 and 10 year auctions in the last two days, today's 30 Year $13 billion reopening completed the trifecta of ugliness, pricing at a surprisingly wide 3.355%, or three whole basis points above the When Issued, which traded at 3.324% at 1pm - the biggest tail in a long time. It was also the highest yield for a 30 Year since March 2012. The internals were not pretty either - the Bid To Cover coming at 2.47, well below the TTM average of 2.59 but hardly the massive BTC collapse that we saw in yesterday's 10 Year. And just like yesterday, the Directs ran for the hills taking down just 8.5%, compared to 15.2% in the past year average, Indirects taking 40.2% and 51.3% or so left for the Dealers who will be happy to stock up on some more collateral.

The treasury complex was not happy with the auction, and sold off promptly as a result.

Equities, on the other hand, which today are stuck in one big upside stop hunt phase, are completely clueless as to what to do here, and are ignoring the primary signal that in the past several weeks - rising rates - has pushed them lower. Oh well - E-Trade babies and such.

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Schmuck Raker's picture

"... the Bid To Cover coming at 2.47, well below the TTM average of 2.47..."


derek_vineyard's picture

ZH's job is to sensationalize bad news.  Only until the crash finally comes will there be any vilification.

CrashisOptimistic's picture

Somewhat true, though "job" should be interpreted as "deduced to generate click revenue".

Regardless, Japan is in control of US T note/bond rates.  If the yen strengthens further, the 10 yr T will be south of 1.9% before you know it.  If not, not.

Odd how people talk about tapers and even macro, when it's obvious the Ts are moving with the yen.

madbraz's picture

Horrible auction...just like in March 2012, when the yield went from 3.4% to 2.5% for its usual annual drop on the backdrop of deflation and negligible global growth (soon to be contraction).


That's a 30% price gain for a 30yr treasury strip, if you get the gist. 

LawsofPhysics's picture

If yields are going down, then treasuries are catching a bid, and that would not be considered a "horrible auction".

So many liabilities and paper promises, So little assets and collateral of real value...

madbraz's picture

True, less collateral by the day as the Fed buys treasuries from banks and takes the most valuable collateral in the chain out of the market (only to pump it out again in the form of securities lending, which looks like the NY Fed will slow down).  


During deflation times, the great depression for one, smart and honest bank CEOs would load up on long term treasuries to weather the storm and make money.  In our age of robber barons, they have forgotten this key lesson.


In summary, there is precious little collateral out there to back up all the gambling that is going on.  When it unwinds (and emerging markets are telling you it may be time), there will be a swift need for collateral and the repothecation chain will be put into question as no one knows who really owns the collateral.


Regardless if you like the way the game is played, those are the rules.  Under these rules, it is hard for gold to have a meaningful place.  


That's why treasuries are unchanged after the initial drop post-auction.  They are an enormous bargain to be had at the long-end, compared to other sovereigns, and risk in general.

LawsofPhysics's picture

"During deflation times, the great depression for one, smart and honest bank CEOs would load up on long term treasuries to weather the storm and make money.  In our age of robber barons, they have forgotten this key lesson." -


Horseshit.  No society or currency has ever died or collapsed because it's purchasing power was too strong.  Wake the fuck up, WWII ended the depression by several mechanisms such as 1) killing off millions of "liabilities" and 2) allowing those same CEOs to re-write the finance rules.   In addition, post WWII, the energy available to mankind drastically increased as nuclear technology and more oil was made available.  This is also a very U.S.-centric viewpoint as many locations around the world have still not improved since WWII.  Please, wake the fuck up, the energy available to mankind for consumption (required in order to actually do anything) has flatlined, yet the population continues to grow.  Maintaining the current quality of life for all 7+billion is not sustainble, period.  Now where are those fusion reactors I ordered?

Manthong's picture

Hmm.. well,  if you want to go that deep, you need to get to Einstein’s walking buddy, Godel and his few proofs..

freewolf7's picture

Now where are those fusion reactors I ordered?

They're waiting for payment first, and want it in physical PM.

LawsofPhysics's picture

good thing I have some then.

slotmouth's picture

WWII did not end the great depression!  I hate when people say this.  WWII was the culmination of the great depression, and it likely prolonged the depression.  Where is the economic value in cratering a city?  You might as well join the Paul Krugman fan club and go break some windows.  You are also making the same mistake as malthus with respect to population growth.  

LawsofPhysics's picture

"Where is the economic value in cratering a city? " - Someone is paid to build those bombs dipshit.  Your comprehension isn't very good is it?  Read my post again, I state outright that all these things are location and perspective dependent.  What was good for one country during WWII was certainly the result of bad things happening elsewhere.

Has the world population slowed down?  No.  Will all these people want and compete for a better quality of life? Yes.  Does it take energy and other resources to deliver a high standard of living?  Yes.  What part of that is sustainable in a closed system?  Mistake indeed, but it isn't mine.

slotmouth's picture

Here is your glorious path to economic expansion:  Govt borrows money to pay people to make bombs, then you destroy someone else's bomb making facilty along with the bomb that was created.  The end result is a transfer of money to bomb makers, more debt, no bombs, and no city. Also, why is the economy not booming right now, we are surely making a lot of bombs?

marathonman's picture

There was tremendous wealth created by all the research into better killing technologies.  Radar, new medicines, chemicals, avionics, nuclear technology.  Lot of tech created in WW2 in the US and Europe and Japan and the US still had the factories after the shooting stopped.

LawsofPhysics's picture

Correct, not only that, the U.S. had access to the energy and then no so much later, everyone had to exchange dollars before trading internationally.  winning wars has consequences.

SheepDog-One's picture

'Robber barrons'...what do they have big Snidley Whiplash moustaches and a monacle and own a railroad?

LawsofPhysics's picture

Paging Dr. Krugman, do deficits still "not matter" when interest rates rise?

Tick tock motherfucker...

kridkrid's picture

Crash now, crash later... In a way, I suppose, they don't really matter.

kralizec's picture

Nice auction, like a big fat loud fart at the dinner party, that always goes over well.  LOL!


fonzannoon's picture

Everyone wants treasuries. No one wants treasuries.

madcows's picture

I moved in to treasuries (mutal fund) this past March.

Got Hammered this May/June.

Moved it all today into cash.... fuckit.  I'd rather lose to inflation than watch it all get blown up in the stock market or "safe" treasuries.

God Damn, Fucking, FED has destroyed every fucking investment option.

madcows's picture

I can't pull it out of the 401(k) w/o major penalties.  Hence, I'll never put money in there again.  The company can keep their match, and the government can keep their taxes.  Even the bank isn't safe anymore.  PM's aren't safe.  everything is rigged or at risk of government confiscation.  All I can pray for is revolution 2.0.  Hang them high.

fonzannoon's picture

I am glad you said that. That is exactly the point. If you are employed you can't pull it out, period. Somehow that keeps getting misunderstood here.

If you are no longer employed where that 401(k) was then you have options

TheEdelman's picture

What options fonz?  Commercial deposit account?  What is safe?  Tell us!!

TheEdelman's picture

Besides a commercial bank deposit, there is nothing.  Not even a mattress (house fire, currency devalue, inflation) is safe.

This is the beauty of the SEC mmf changes.  Investors (and madcow) will move money out of mmfs and into commercial deposits.  The banks will then make some longer term loans on the deposits.  Just what the Bernake needs to get an economy rollin!  Remember, Japan and their mattress depositors "are the reasons" for their decade recession. Banks Win!

What about mmf tied 401ks?  With the SEC changes, only option is a move into stocks and bonds! Wallstreet wins!

Note ordering.  Banks, wall street, main street.

This is pure genius (for the short term) and why the new SEC rules likely become reality. 

TheEdelman's picture

Lets say, in a different time dimension, the SEC was looking out for mainstreet AND the long term.  

New regulations could be... what?

What about the investment quality of the underlying mmf??

Crazy talk!

smlbizman's picture the penalties and tell them fuck you....its like divorce its expensive but worth it...i did 3 yrs ago and i sleep alot better...

TheEdelman's picture

Got news madcow, that cash mmf, traditionally backed by commercial notes... is now backed by zero yielding short term treasuries... "all today into cash" doesnt mean much.  

And if what the Fonz linked comes into effect...youre going to get destroyed no matter what.   


NotApplicable's picture

It's quality collateral, so whadya expect?

Winston Churchill's picture

Next to last man standing,

In the end there will only be one,gold bitchez.

USisCorrupt's picture

Can whoever is bogarting that blunt pass it to me next?

q99x2's picture

BTFD WWIII did not start yet.

cynicalskeptic's picture

not for lack of trying......    they couldn't get it up and running over Iran despite major efforts - seems like they're trying to ramp up Syria now

Son of Loki's picture

Did someone mention "burn?"


Colorado wildfires destroy more than 350 homes, force evacuations

freewolf7's picture

Where there's smoke, there's summer.
The new normal in CO.
Watching the plumes from here.
Gets us ready for market crash, etc.
What doesn't kill you...

Son of Loki's picture

Sorry to see more forest burning, esp there since I lived/worked there one's really beautiful  but I guess has hidden dangers after all. I wonder how much people paid for those now-burnt-down houses?

omi's picture

buy bonds for a bouncey 

MFLTucson's picture

This stock marekt is the biggest fraud in history.  What a fuckin joke!

lolmao500's picture

Meh it's nothing.

Ugly? Nowhere near that. When the interest reach 7-8% then yes, but until then... BS!

disabledvet's picture

here's a theory on what's going on with that space as well: in other words "Japan" (which obviously is a MASSIVE holder of US treasuries) "is being a forced liquidator" (although maybe at the highs of the market which isn't all that bad for them.) while i don't necessarily agree with his analysis that "QE has caused the bond market to sell off" (the original purchases were overwhelmingly in short duration yet the huge rally was in long duration!) i do agree with "i fail to see how tapering is either bond negative or economy positive." hence i expect...for a multitude of reasons...a correction...or worse... in the equity space. by definition "less QE means less spending and less money" since the Government will have less..."free money"...let alone a massive debt load still to service "on account of bailouts for Wall Street" no less. (the irony that Illinois might go bankrupt as a consequence is not lost on me.) "one hell of a recovery in Government" but that's about all i see. with a few exceptions of course...