Solid Demand For 30 Year Bond Auction Day After Fed Monetizes 30 Year Bonds
While hardly the spectacular 10 Year reopening from yesterday, today's 30 Years reopening of the RC4 Cusip concluded the weekly issuance with solid demand for today's $13 billion in long-end paper. Printing at a yield of 3.820%, the auction priced through the 1pm When Issued of 3.83%. Perhaps a reason for this is that the yield, like yesterday, was the highest since July 2011, and while the 2.40 Bid To Cover was below the TTM average of 2.51, it was a notable improvement from the deplorable 2.11 in August. The internals saw the Directs stepping up, just like yesterday, and taking down 20.6%, above the 13.8% average, leaving 37.7% for Indirects and 41.7% for Dealers - hardly notable.
However, what is perhaps most notable, is that it was just yesterday that the Fed was buying 30 Year paper from the open market. Although we will give Simon Potter this much: the amount of RC4 purchases the day before the reopening was $0. Looks like no dealers want to part with OTR collateral. Still, the Ponzi elements of the set up where the Fed monetizes bond issuance both after and before a given auction does not escape us, or anyone else for that matter.
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