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Strong Auction Sells $24 Billion In 10 Year Par-Priced Paper
Today's $24 billion in new 10 Year paper, with a 2.75% cash coupon, sold with a perfect par, or 100.000, price, for a yield of 2.75%, which stopped through the 2.754% When Issued. The auction was strong in every aspect: the Bid To Cover was a solid 2.70, higher than last month's 2.58, the second highest of the past 6 months, and just a fraction below the TTM average of 2.73. The Primary Dealers took down 33.8%, as there was a scramble by the Indirects to buy paper, leaving them with 47.7% of the takedown, well above the 38.3% TTM average, and the second highest going back all the way to November 2011. Directs were therefore left with 18.6%, modestly less than the 22.52% TTM. Overall, a solid auction which added some much needed collateral to an otherwise very illiquid market.
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taper or no Taper... these argument will continue to drive bond volatility thereby enriching participants who are directly invovled - http://hedge.ly/19hEvMq
What does it all mean?
So now that the bond auction if over, the Primary D's can focus their attention on ramping up ES. Looks like another new-high day for the indexes. The Primary D's know they can sell this shit to the bernank in a day or two for a quick 2% to 3%. Not bad for a few days work.
Does anyone dare to go short ES of NQ yet?
Not me. Are there any shorts left? Anyone?
There will be no taper.
save the currency or save the economy / legacy ....can't have both
with a strong currency comes deflation and their ponzi house of cards of entitlements and six figure public service sector staff all around comes crashing down
Who bought the 24BN in 10 year paper, Berskanke and Yellen down at the FED?
Here is a thought on Taper. K-Hen crashes the stock market, flight to "quality" ensues and the fed is able to slowly unload its bonds.
Frontrunning the FED. ho hum.
Exactly.
Tyler says:
Overall, a solid auction which added some much needed collateral to an otherwise very illiquid market.
Until the Fed comes along and vacuums up all that liquidity in the secondary market.
Isn't this just the FED buying the treasury paper....in the appearance that someone cares?
That would depend on who the "indirect" buyers were. It is my understanding that the "PD" and "direct" bidders are pretty much the Fed or friends of the Fed (China - yes, the chinese "elite" have been on board with this plan since 1971).
No it's the primary dealers buying the paper. They will flip it to the fed on the next POMO date for a tidy profit.
DrE Bingo ! So how strong is it really?
Fine! Now we need the interest rate on that to rise just a measly 25 points, and all will be so bright, that we will all need shades.
Buy that worthless paper.
According to Macquarie Research:
https://app.box.com/s/kazx1rawh3pxptn555c3
The Bold and the Brave
- In the current circumstances, it is becoming more likely that the successful reflation of the major economies will require some bold and brave policy initiatives that build on the current unconventional monetary policy measures. Not surprisingly, several clues to the way forward come from policy experiences in the Great Depression (notably the US and UK).
- Indeed, the Economist notes that lessons from Depression scholars like Ben Bernanke and Lars Svensson highlight several key ingredients to a monetary policy solution; namely:
- announce an inflation or price stability target that guarantees a period of above-average inflation;
- depreciate the exchange rate; and
- support the depreciation, to the extent necessary, through direct intervention in foreign exchange markets (ie: print money and buy foreign currencies and assets).
- Interestingly, the underlying strategy revolves around the focussed pursuit of inflation, not in beggar-thy-neighbour competitive exchange rate devaluations as many continue to fear as a consequence of ongoing QE monetary accommodation.
- In the event, the clear and present trap for the major central banks in the current environment is one of ‘role stereotyping’ by financial markets that is the result of over 20 years of policy success in targeting inflation. It will take some very bold and brave monetary policy initiatives to convince markets that these ‘independent’ institutions are prepared to do whatever it takes to sustainably reflate their economies.
I would not buy it at a 6% interest rate
I think the bond buyers got a bonus for buying. Bernanke will chauffeur the guy who buys the most for a month.
According to Ernst and Young LLP:
http://www.ey.com/Publication/vwLUAssets/Challenges_for_central_banks_wider_powers_greater_restraints/$FILE/Challenges_for_central_banks_wider_powers_greater_restraints.pdf
As recently as five years ago, most central bank governors could walk down the main street of their country’s capital city unnoticed, their names and faces familiar only to avid readers of specialist journals. Today, in many countries, they are as well known as the government leaders they serve, and their words and deeds are the subject of heated debate in newspapers, bars and taxis. The continuing financial and economic crises have thrust central bankers center stage and cast them as leading actors, simultaneously berated as progenitors of the crisis and hailed as potential saviors.
It is not clear that all central bankers welcome this transition from membership of a hitherto largely anonymous technocratic elite to an increasingly public role. This white paper argues that central bankers need to adjust to an increasingly public and prominent position on the political stage. A fundamental debate about the position of central banking and its relationship to government is now under way.
The financial crisis has led to considerable interlinked economic, sovereign debt and financial sector turbulence. At the time of writing (September 2012) these concerns show little sign of abating. This has been accompanied by increasing volatility in the political arena and an unstable world against the backdrop of a wholesale macroeconomic global transformation. The benign economic conditions and stable politics of the “Great Moderation” have been shown to be transitory. The global economy confronts its greatest challenges since the Second World War.
Central bankers have achieved a new prominence and become pivotal members of the policy-making establishments of both national and intergovernmental organizations. As a result of a growing responsibility for financial stability, coupled with their injection of massive amounts of liquidity into the financial system has, central banks in many jurisdictions, have extended their powers and remit beyond their traditional “lender of last resort” function. We suggest in this report that this extension of powers is unlikely to be temporary and may not be entirely desirable. It raises far-reaching questions about the accountability and transparency of the principal activities of central bankers.
In addition to their traditional monetary policy and governmental banking roles, central banks have become national and global firemen with growing responsibility for the resilience of economies, the stability of financial systems and individual financial institutions, macro-and microprudential regulation, and macroeconomic and quasi-fiscal policy. They have gleaned far greater exposure to the media, politics and electorates. They have also taken on a whole range of new strategic and operational tasks and become exposed to far greater financial, reputational and operational risks. As their responsibilities have grown, so have their balance sheets and the accompanying risks.
From acting largely behind the scenes, central banks have now entered the political arena in a very public manner. Whether as principals, agents or advisers, it is unimaginable that there would no longer be a strong political dimension to the activities of central banks. If that is the case, to what extent and how should central banks strive to maintain political neutrality? Should fiscal policy, for example, be an arena restricted to elected politicians, or should the views of central bankers be publicly aired as well? To whom should central bankers be accountable, and how transparent should that accountability be to the media and to electorates?
If this expanding remit of new roles and activities is to become permanent, what targets should be set for a central bank, and who should decide whether these targets have been met? While it is comparatively straightforward to set a target for inflation, how does one measure “financial stability,” and just what degree of financial instability is deemed acceptable?
U.S. Generals as well. It use to be they stayed out of politics but ever since Bush decided to have them rubber stamp his war policy they seem to be celebrities.
???
Washington, Jackson, Grant, Eisenhower, et al ...
Generals have always been involved in politics.
Organizationally through the Dept. of War, or the politically corrrect 'Defense'.
Problem is the Sparta-like militarism that has been greatly infused recently (since WW2) into the US economy and culture. Thereby, Generals and the MIC have been given a greater voice and influence.
You've glossed over the most important point. If 10yr UST's are sold at par, does that not mean, at least out to 10yrs, UST's are trading 'money good', literally as money? That is despite the fact that previous 10yr bond issues must have dropped in price for the market yield to have risen in the last six months or so.
With the gold price falling in that period, it indicates a massive inflation of US credit. When it blows the world will surely be destroyed, since the rest of the world is neck deep in US credit.