10 Year Auction Spooked By Looming Minutes, Tails 1.1 Bps, Still Prices At Lowest Yield Since June 2013

Tyler Durden's picture

Ahead of the FOMC Minutes, many seem to have taken a cue from DB's bond trading recos, and taken a flier on today's just concluded reopening of $21 billion in 10 Year paper (technically 9 year 10 month), which probably explains why the 10 year paper just priced at 2.597%, a rather gappy 1.1bps tail to the 2.586% When Issued. Still, pricing at just under 2.60%, this was the lowest 10 Year high yield in over a year, since the 2.21% in June 2013. Considering the recent surge in negative repo rates, expect any freely floating paper to be promptly mopped up despite the apparently weak auction.

The internals were nothing to write home about: the Bid to Cover was 2.57, the lowest since February, and below the 2.68 TTM average. Just like yesterday's 3 Year, Directs were scarce and took down just 13.9%, the lowest since January, and well below the 21.6% takedown hit in May (highest of 2014). Indirects were flat at 39.6%, up from 36.1% a month earlier, if also below the 43.9 average. This means the Dealers were left holding 46.5% of the auction, far above the 37.4 average and the highest since May of 2013 when Dealers were left holding 49.2%.

Of course, with the auction coming just an hour ahead of FOMC Minutes which many suspect may come in more hawkish than any in recent years, it is no surprise that both the auction and the bond market reaction were less than enthused. Our advice: wait until the Minutes smoke clears before deciding what the real demand for high quality collateral truly is.

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SheepDog-One's picture

Spooked? Don't be silly you primary dealers banksters, you know you'll be bailed in yet again by the Fed.

Sudden Debt's picture

Bailed out... It's the accountholders who will be bailed in

disabledvet's picture

Can't speak for the laws of Belgium but if treasuries stay where they are for ten years...annuities are the "greatest deal ever that just got a little less great"...but are still better than a savings account.

That would have to be a VERY well run insurance company of course.

fonzannoon's picture

Those UST's will be bought. Just possibly a few bps higher in an hour from now.

SheepDog-One's picture

Right, no reason for any jitters. The flip is built in.

fonzannoon's picture

i guess no one at the auction was tipped off early.

disabledvet's picture

"The only true collateral is gold."

And the only rule with gold is "never use it for collateral."

China obviously is on a borrowing binge to end all borrowing binges. "They will use treasuries for their collateral." So exactly WHAT are they buying with all those trillions then?

Food? Check.
Energy? Check.
Distribution? (Google "Nicaraugua Canal etc.) Check.

And a mountain of debt so they can sell into demand (credit card, home, auto.)

These folks who outsourced their entire industry have been fools. "They destroyed their own demand"...and now the Chinese are selling into that!

Maybe they just make superior products of course. It's hard to imagine a bigger market than North America's...outside of China's of course.

youngman's picture

Spooked...but the interest rates are lower.....how does that happen.....lol

slaughterer's picture

Do not forget the Draghi speech 30 minutes after the FOMC minutes release. 

SheepDog-One's picture

The Fed will say good words of hope, and so will the Draghi....nothing to fear here as usual.

NotApplicable's picture

Sorry, but I'd rather forget.

SheepDog-One's picture

Nothing to fear but fear itself......indeed.

Squid Viscous's picture

here's how to trade the fed minutes, meetings etc. JUST FUCKING BUY LIKE A DRUNKEN MONKEY before they announce anything, they are working for the banks, duh,