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Dealer Awards Surge, Directs Plunge In Ho-Hum 2 Year Auction

Tyler Durden's picture




 

It was only recently that 2 Year Treasury Notes were considered money-equivalent, "high quality collateral." Then the infamous Fed "dots" Snafu took place, and suddenly bond investors started being worried about duration risk on paper that matures smack in the middle of 2016, a year in which some Fed members see a Fed Funds rate as high as 4%+, which of course means that 2 year paper issued at par would be trading far, far lower. Sure enough, such concerns have materialized in the auctions of recent 2 Year paper, the most recent of which was concluded moments ago, pricing at 0.447% - in line with the When Issued but well above the TTM average of 0.35%, although a trace lower than the near "freak out" 0.469% , and highest since May of 2011, recorded last month right after the March FOMC press conference where Yellen had to scramble to preserve the rigged and manipulated market together.

Additionally, and most notably, the Primary Dealers' take down of 57.68% was the highest since May of 2013, surging from the 37.5% in March, which also meant that Indirects tumbled from 40.9% to 23.4% -the lowest of 2014 - with Directs remaining roughly flat at 19%, a tad below the 21.5% last month.

So while the auction overall was not fireworky just yet, a few more "dots" fiascoes and suddenly the short end of the curve is going to get a whole lot more interesting. And should European idiot asset managers, once they have taken the Spanish 10 Year to 0%, decide to bid up US paper, and inverted the 2s10s, well that is the time to quiet get out of dodge.

 

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Tue, 04/22/2014 - 13:22 | 4683200 Stoploss
Stoploss's picture

Perfect timing for the forex clusterfuck currently in play.

Who's it gonna be?

Tue, 04/22/2014 - 14:20 | 4683503 NotApplicable
NotApplicable's picture

I'm assuming fear of dots will soon be replaced with fear of everything else, requiring the ole familiar rush into "safe haven" assets.

Tue, 04/22/2014 - 13:24 | 4683212 Stoploss
Stoploss's picture

If ur bored there's a dick pfister somewhere on the tube.

Tue, 04/22/2014 - 13:30 | 4683233 BandGap
BandGap's picture

I have no idea what you mean, but I am willing to learn. Will it be someplace special?

Tue, 04/22/2014 - 13:28 | 4683224 LawsofPhysics
LawsofPhysics's picture

Please, understanding what real collateral is has long been eliminated from the eCON books...

this is about monetizing debts and deficits for the duration of the empire's decline...

hedge accordingly.

Tue, 04/22/2014 - 15:43 | 4683913 rosiescenario
rosiescenario's picture

Good thing that the entire credit situation in China is on a firm footing otherwise one might regard their note holdings as a market overhang....not that anything rational appears to matter anymore.

Tue, 04/22/2014 - 16:07 | 4684005 WMM II
WMM II's picture

so, the spanish 10 year at 3% is the same value as the u.s. 10 year at 2.76 with the difference in % the likelyhood of default?

 

hmmmm....

 

and the mysterious belgium puchaser is not 'lending' out their u.s.t's bought with euros to sovereigns to make up the 'collateral' to drive down the costs to sovereigns to borrow.

with a .25ish vigorish.

 

hmmmm...

 

:)

 

 

 

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