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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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. 

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!!?

MillionDollarBoner_'s picture

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

SAT 800's picture

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

Zirpedge's picture

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

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.  

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.

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.

Al Huxley's picture

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

youngman's picture

fundimentals are coming back...good

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:)

Kreditanstalt's picture

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

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...

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...

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.



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.

Stoploss's picture

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



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. 

SAT 800's picture

maybe Belgium ran out of waffles.

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.

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.

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.

LawsofPhysics's picture

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

this would be a potential "flash point".

SheepDog-One's picture

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

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. 

PlusTic's picture

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

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....

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

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.

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.

JRobby's picture

Woke up this morning and I got myself a beer

The future's uncertain and the end is allways near

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.

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.

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.

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.

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.