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Dealers Carry Weak 2 Year Auction; Indirect Bid Slides

Tyler Durden's picture




 

While pricing right on the When Issued screws, or 0.540%, tied for the lowest high yield since October 2014, today's $26 billion auction of 2 Year paper was nothing to write home about. From a low Bid to Cover, which at 3.30 was down from March's 3.457%, and the lowest of 2015, to a slide in the Indirect bid to only 38.1%, also the lowest for 2015, to the highest Dealer take down of 2015, with commercial banks left with 47.8% of the short-end issue, there was not much demand for the paper which pays a 0.50% cash coupon and which matures on April 30, 2017.

Still, the lack of a tail is what the algos were looking at, and they got it. As a result the bid following the auction across the curve which has pushed the 3Y yield to the LOD, quickly erased any lingering doubts one may have had about the auction's strength.

And yet one thing is certain: when the maturity date rolls by, the Fed will still be scrambling to explain why, over a decade later, it still hasn't done even one rate hike (spoiler alert: snow in the winter).

 

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Mon, 04/27/2015 - 13:13 | 6034438 KnuckleDragger-X
KnuckleDragger-X's picture

All the shiny is just awesome and where's the unicorn I was promised....

Mon, 04/27/2015 - 13:24 | 6034501 NotApplicable
NotApplicable's picture

Heat in the Summer!

Mon, 04/27/2015 - 13:13 | 6034439 walküre
walküre's picture

Fed needs to raise rates to remain credible. Nobody is biting and that is a faith based issue. There is no free lunch and nobody can have their cake and eat it too, including the Fed.

Mon, 04/27/2015 - 13:26 | 6034513 NotApplicable
NotApplicable's picture

Why would they give a fuck anymore about appearing to be credible to a facade? I'd say they've moved on, and their credibility is now a function of controlling the collapse.

Mon, 04/27/2015 - 14:13 | 6034718 walküre
walküre's picture

It's possible they fully conceded. Depends on who they have to answer to. No, I don't mean Congress. Higher up the food chain.

They were pretty open announcing various forms of QE. They reduced and finally stopped QE. All in the open. They have been saying that rates would rise. Whatever they have done in the past, has been announced beforehand.

There has been no announcement whatsover about possible further QE or stimulus. Combine that with the other cyclical and historical stuff... I don't think they're bluffing - regardless of what may happen.

Mon, 04/27/2015 - 14:07 | 6034570 KnuckleDragger-X
KnuckleDragger-X's picture

Derivatives are the reason they can't be raised. The mega-banks like JPM and GS are heavily leveraged in them and right now they are easy money but even a 25bps raise could kill all the big banks at once if the market really starts oscillating.....

Mon, 04/27/2015 - 14:15 | 6034728 walküre
walküre's picture

Could they not regulate the fallout from derivatives?

Mon, 04/27/2015 - 13:20 | 6034471 LawsofPhysics
LawsofPhysics's picture

Go ahead and raise rates...

tick tock...

Mon, 04/27/2015 - 13:31 | 6034547 buzzsaw99
buzzsaw99's picture

i'll bet the fed wishes t yields were higher so they could justify buying MOAR

Mon, 04/27/2015 - 13:41 | 6034596 Consuelo
Consuelo's picture

Ah yes, the dreaded 'LOD'...   Bow my head to the greatest tag team in history, the Legion of Doom - aka, the Road Warriors.

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