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Bonds Slide Following Huge Tail In 30 Year Auction, Lowest Bid To Cover Since August 2011

Tyler Durden's picture




 

If one had to use one word to describe today's 30 Year bond auction, it would "atrocious." With the When Issued expecting the 30 Year refunding (CUSIP: RG5) to price at 3.40%, instead we got one of the biggest rails in recent history when the Treasury announced that the high yield required to sell $16 billion in 30 Year paper was a whopping 3.44%. To be sure, this was the lowest 30Y auction yield since June of 2013, however we may be reaching a point when there is simply no issuance demand for new paper. This was perhaps best seen in both the Bid to Cover which tumbled from 2.52 in April to just 2.09, the lowest since August 2011, and the hit rate of the Indirects, who took down 40.4% of the auction, and were hit for 99.7% of the bids tendered - a whopping result. Directs fled as well, taking down just 8.4% of the auction, the lowest since March 2013, leaving Dealers with 51.2% of the auction, the most also since March 2013.

So was it a buyer's strike, or did the dealers simple game the auction in such a way to stop the relentless buying of the long end, and to indicate that there are fissures forming in the house of cards Treasurys, at a time when nobody can explain the relentless bid for both stocks and bonds?

Whatever the reason, the bond complex suddenly shook, with selling across the curve.

 

Which magically recoupled bonds and stocks...

 

What happens next is unclear, but if one was CNBC and had an interest in pushing lemmings not in stocks but bonds, this move would promptly be described as a "clear buying opportunity"... after all "where else can you put your money"?

 

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Thu, 05/08/2014 - 13:16 | 4740275 maskone909
maskone909's picture

wtf Belgium!?!?

Thu, 05/08/2014 - 13:22 | 4740302 SHEEPFUKKER
SHEEPFUKKER's picture

Perhaps every now and again tptb attempt to convince the masses that these markets are real. Surely Belgium or Nigeria or who the fuck ever will be in there next time "buying" hand over fist. 

Thu, 05/08/2014 - 16:36 | 4741056 Headbanger
Headbanger's picture

No shit really..   Who would want to buy 30 year US Treasury bonds when the US won't be here that long!!?

Thu, 05/08/2014 - 17:21 | 4741183 MillionDollarBoner_
MillionDollarBoner_'s picture

It was meant to be Narnia's go at hoovering up the Foreign Buyer allocation...

http://www.treasury.gov/ticdata/Publish/mfh.txt

Thu, 05/08/2014 - 13:25 | 4740315 HedgeAccordingly
HedgeAccordingly's picture

undersuppy what???? 

Thu, 05/08/2014 - 13:29 | 4740332 SAT 800
SAT 800's picture

Nice day trade; $1,000 a contract today for a short on the Long Bond Futures Contract; ZB.

Thu, 05/08/2014 - 14:16 | 4740504 Zirpedge
Zirpedge's picture

Pluggin my MyRA with both barrels today. Forget my daughters college fund, that's just good money after bad.

Thu, 05/08/2014 - 13:18 | 4740281 Grande Tetons
Grande Tetons's picture

OT...I can not find this on the net yet. But somebody just got rocked by an earthquake. Mexico? 

Felt pretty big...still some aftershocks.  

Thu, 05/08/2014 - 13:19 | 4740290 maskone909
maskone909's picture

6.8 mexico city

Thu, 05/08/2014 - 13:25 | 4740316 Grande Tetons
Grande Tetons's picture

Tks, Just found that. Not sure how accurate that is. This felt a lot higher than that. 

Thu, 05/08/2014 - 13:26 | 4740318 Hippocratic Oaf
Hippocratic Oaf's picture

It's Guerro. And they just had a 7.2 in April

Thu, 05/08/2014 - 13:18 | 4740286 LawsofPhysics
LawsofPhysics's picture

All stimulus is fungible...

A traditional eCONomist might see the increase in cash sales for hard assets (real estate) as a major inflationary "red flag"....

hedge accordingly.

Thu, 05/08/2014 - 13:20 | 4740293 Jack of All Trades
Jack of All Trades's picture

Mr. Yellen's printer was temporarily out of ink. He/she will make sure it is back to normal by next Tuesday.

Thu, 05/08/2014 - 13:57 | 4740433 Al Huxley
Al Huxley's picture

Staples had a really good sale on ink Tuesday,  Maybe it's still on.

Thu, 05/08/2014 - 13:21 | 4740297 youngman
youngman's picture

fundimentals are coming back...good

Thu, 05/08/2014 - 13:56 | 4740428 LawsofPhysics
LawsofPhysics's picture

Optimist.

Thu, 05/08/2014 - 17:45 | 4741257 new game
new game's picture

no really. the taper is bring about some semblance of predicting the future. that is if you are believing the bond move.

bonds have made their move to the wall again. if they continue, equities are going to sell in may bla bla bla.

i think that the overall move forshadows equities tanking 10 percent. lots of suttle moves going on.

ten walled at 2.6, so that is key for now...

short duration catching up- curve either rises at long or short breaks resistence(or both).

fuck yellen, she is clueless, the market is telling her to keep tapering as ample buy side filling her gap:)

Thu, 05/08/2014 - 13:21 | 4740300 Kreditanstalt
Kreditanstalt's picture

Dollar-denominated government bonds losing their appeal?  Could we soon be seeing currency-debasement-driven price inflation rearing its head?

Thu, 05/08/2014 - 13:57 | 4740435 LawsofPhysics
LawsofPhysics's picture

Well, I for one am just "shocked", shocked I tell you...

 

did the "bread and circuses" just get a bit more expensive motherfuckers...

Thu, 05/08/2014 - 17:48 | 4741270 new game
new game's picture

not how they measure it-1 percent(fucking joke), but hey that all that matters to them. they see what wall street wants, self fulfilling loop of smoke and mirrors, because thye KNOW exactly what they are doing to average joe and jane...

Thu, 05/08/2014 - 13:22 | 4740303 madbraz
madbraz's picture

No mention that this was a $16 billion auction, as opposed the $13 billion amount for all the prior auctions.  So the bid to cover would have been 2.57 apples to apples - in line with averages.

 

If there is one thing the Fed and the bankers hate, it is the long bond.  Can't rig stocks higher without the long bond going the opposite way.

 

 

Thu, 05/08/2014 - 14:01 | 4740447 OC Sure
OC Sure's picture

"...stocks higher without the long bond going the opposite way."

This is the anamoly and vice versa is not.

Prior to the Fed, the yield gap between BlueChip stocks and 3A Bonds was 3 percentage points. Interventionism, the Fed, makes this gap unstationary and thus far more difficult to identify.

Whatever illusions the Fed creates to disguise the facts they cannot ever change the facts.

The fact is that bonds and stocks move in tandem as competitive yielding instruments.

Thu, 05/08/2014 - 13:24 | 4740308 Stoploss
Stoploss's picture

"clear buying opportunity"... after all "where else can you put your money"?

 

Indeed..

Thu, 05/08/2014 - 13:25 | 4740312 NOZZLE
NOZZLE's picture

The functional equivalent of an individual taking out a $100,000 home equity loan on a $300,000 house that already is collateral for $3,000,000 in prior loans and then planning to invest the money in windmills and other green energy shit. 

Thu, 05/08/2014 - 13:27 | 4740322 SAT 800
SAT 800's picture

maybe Belgium ran out of waffles.

Thu, 05/08/2014 - 13:27 | 4740323 praps
praps's picture

The relentless bid for stocks and bonds?  How about this?

 

If the government was going to confiscate cash from the wealthy, what would the wealthy do in anticipation of this?


1)  Convert cash into assets - bonds, equities, real estate.  Outcome - the dollar weakens. Check.


2)  With respect to buying bonds, buy only long dated.  Sell the short end, or when they mature they may be caught up in the confiscation.  Outcome - yield curve flattens.  Check.


3)  With respect to buying equities, buy only big cap, low PE stocks.   Once the wealth confiscation comes into affect there would be far less money around and high growth stocks would get hammered.  Outcome - Dow rises - Nasdaq and R2K falls.  Check


4) Pile cash into real estate.  Outcome - Number of cash buys increases.  Check.

Conclusion - the wealthy are anticipating a confiscation of cash and are acting accordingly.

Thu, 05/08/2014 - 13:52 | 4740404 walküre
walküre's picture

When not IF the US government starts confiscating the tremendous wealth that's been accumulated over the past 5 years (remember Wall Street +112% and Main Street +4%) then they will also renegotiate the debt everyone is holding in form of UST paper. They will do this without ever calling it a default but technically it is of course just that.

To be perfectly honest, I could care less. Let the assholes bleed. It's not like they would end up in the poor house when they "suffer" a 75% haircut.

The guy at the hedge fund who "earned" $3.5 billion last year has only earned that as a fraction of the wealth he's shuffling around on behalf of his clients.

There is so much wealth at the top, it's suffocating every economy.

Thu, 05/08/2014 - 14:20 | 4740525 NoWayJose
NoWayJose's picture

Most likely scenario is that the Fed will continue to pump out 'Old Dollars' to pay off the debt and avoid a default.  Then there will be 'New Dollars' that will be deemed 'safer'.  Of course, you can convert your 4 Old Dollars into 1 New Dollar -- exactly like the 75% haircut you described.

Thu, 05/08/2014 - 14:23 | 4740534 LawsofPhysics
LawsofPhysics's picture

Yes, also, you have to use "new dollars" to pay your taxes...

this would be a potential "flash point".

Thu, 05/08/2014 - 14:19 | 4740516 Zirpedge
Zirpedge's picture

savers r teroriss

Thu, 05/08/2014 - 13:28 | 4740328 SheepDog-One
SheepDog-One's picture

Russia just said they were forced to respond....did they fuckover the Fed 30yr junk bond auction?

Thu, 05/08/2014 - 13:37 | 4740355 ebworthen
ebworthen's picture

Santelli gave it a "D-".

If the entire economy weren't a giant Ponzi - Yellen would announce the end of QE and put the prime rate at 6% after the close today. 

Thu, 05/08/2014 - 13:36 | 4740356 PlusTic
PlusTic's picture

everyone is already long the 30yr vs. 5yr on the flattener...unwind-time bitches!

Thu, 05/08/2014 - 13:52 | 4740394 The Most Intere...
The Most Interesting Frog in the World's picture

If I'm Obama, I'm pissed the stock market is the only game in town.  Watch as treasury yields go LOWER, ALOT LOWER...  Treasuries will be the only game in town....

Thu, 05/08/2014 - 13:56 | 4740418 Yen Cross
Yen Cross's picture

   I posted an article about the Chinese f/x diversification going on last week. Here's another another one about PBoC buying UST. They are also fucking with the Japanese through yen strength from lower u.s. bond yields.

   US auctions long bonds at lowest yield in nearly three years

Thu, 05/08/2014 - 13:59 | 4740441 Spungo
Spungo's picture

The fun starts when the US gov starts issuing bonds in SDRs. That's when the real hyperinflation begins. Of course, it can easily be stopped by cutting the budget and closing tax loop holes, but that takes voting and shit. It's way easier to run the printing press.

Thu, 05/08/2014 - 14:09 | 4740473 LawsofPhysics
LawsofPhysics's picture

I don't see anyone or any country accepting any fiat once all this shit blows up, SDR or otherwise.

As I have posted earlier, the first soveign or group of sovereigns to adopt a production-backed or commodity backed-monetary system with a sound system of contract law that puts leaders to death for fucking other people over will be the first economy to take off.

Don't hold your breath.

Thu, 05/08/2014 - 14:02 | 4740449 JRobby
JRobby's picture

Woke up this morning and I got myself a beer

The future's uncertain and the end is allways near

Thu, 05/08/2014 - 14:15 | 4740503 NoWayJose
NoWayJose's picture

Interesting that at the beginning of the bailout process the Fed was buying 'toxic assets' that no one else wanted.  Now it looks like the Fed is still buying 30 year bonds -- or in other words - toxic assets that no one else wanted.

Thu, 05/08/2014 - 14:21 | 4740530 LawsofPhysics
LawsofPhysics's picture

Yes, but lots of people now dumping cash into real estate, or what was largely considered "toxic". 

they really are looting the treasury and killing the dollar, pretty damn clear now...

Yes, we can still use dollars to pay our taxes, but for how much longer?

This is what I want to know.

Thu, 05/08/2014 - 14:39 | 4740599 tommylicious
tommylicious's picture

at low rates, duration is at a maximum, while implied vols are at a minimum.  not makes sense.  somethin' gon' don' give.

Thu, 05/08/2014 - 20:42 | 4741801 virgilcaine
virgilcaine's picture

It's a con game no? Pieces of paper backed by more paper? Huh

Wait until Obongo's mug is on a piece of green tp..full faith and credit.

Thu, 05/08/2014 - 21:05 | 4741896 virgilcaine
virgilcaine's picture

It's Bernanks "Tower of Babel" he's the one who created it and the only one who can speak it. Go on a dinner date with him and he will explain it clearly to you.

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