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Blistering Demand For Benchmark Treasurys: Indirects In 10 Year Auction Highest Since 2011

Tyler Durden's picture




 

If yesterday's strong 3 Year auction caught the hordes of shorts unaware, sending the repo rate plunging from a super special -1.7% to positive, today's just concluded 10 Year auction was nothing short of epic, in virtually every possible way.

The auction priced at 2.237%, through the When Issued 2.255% by a whopping 1.8bps, with a 2.72 Bid to Cover, the highest of any auction in 2015. The internals were just as impressive, with Indirects taking down a massive 60.2%, the highest since December 2011, and even Directs joining the fray and allotted 20.9% or more than the Dealers whose final allotment of just 18.9% was the second lowest ever.

In short, after the past two days of auctions any fears that there is a secular drop in demand for US Treasurys can promptly disappear... if only until tomorrow's 30 Year which may well fare quite a bit worse if indeed there are concerns about the long-term viability of the deflation trade.

On the other hand, continued strength in the primary market will mean that contrary to the ECB's attempts to instill fear about bonds, the demand for deflation protection is alive and well.

As for right now, it is clear that the bond market breathed a sigh of relief once the high yield hit the tape.

 

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Wed, 05/13/2015 - 13:23 | 6089855 NotApplicable
NotApplicable's picture

Facade Shining 101

Wed, 05/13/2015 - 14:04 | 6090000 flacon
Wed, 05/13/2015 - 13:24 | 6089859 madbraz
madbraz's picture

and as soon as they could, someone with endless pockets or fear of a capital loss stepped in and drove long bond yields up 3 basis points in 9 minutes to revert the positive reaction post-auction!!!

 

dudley do, dudley don't care

Wed, 05/13/2015 - 13:31 | 6089879 KnuckleDragger-X
KnuckleDragger-X's picture

The bond market is where they'll do the most to keep the things afloat. Far too much hypothetical money tied into it both directly and indirectly.....

Wed, 05/13/2015 - 14:38 | 6089943 CPL
CPL's picture

Of course, it's been set-up that way since the social security act of the 1930's.  Dumb pig fuckers never thought that their own children would be worthless, petty thieves.  They believed they were noble and trustworthy, most of the were just spoiled little thieving cocksuckers that only play the system for what they can get rather than running it for the next generation or the one after that.

Now to highlight the value of the bond market, it's value along with American dollars has been 0 since around 2003-2004.  The dot.com crash was arranged to be sure, but the 'movers and shakers' under estimated the penetration into the pensions and  retirement funds.  You can tell from the housing bubble being blown in succession after the dot.com crash, with around twenty other bubbles blown simultaneously.   So when you are looking at the bond market you are actually looking at pensions being raided, not working capital that's producing anything.  The symptom of that, if you pull back that chart onto a 10 year.With the flat action on all bond markets worldwide that's just pension funds running out of room to pick up value in the exchange because the bid to cover isn't moving anywhere.  It's finished, no movement in a bond market with only central banks as the buyers.  It's been over for a while. 

People running it think they can recover from it, which they can't.  They've run out of places to shuffle their junk bonds just like the mid 1980's with the S&L junk bond crisis.  Difference is then and now.  This is now worldwide, it's not just wallstreet...it's in every financial centre with a central bank.  Soon it'll flat line and they'll be stuck holding the bag.  Unfortunately also means all those retirement and pension funds stop giving out money the same day.  Then central banks will print to cover the difference and we'll wake up to 20 dollars for a loaf of bread. 

Why?  That's how it's been designed because the foundation of the US economic system (adopted by many) is built on quicksand and the simple action of it running breaks it.

Wed, 05/13/2015 - 14:58 | 6090199 ucde
ucde's picture

thanks, interesting ideas there.

Wed, 05/13/2015 - 13:47 | 6089929 buzzsaw99
buzzsaw99's picture

I felt a great disturbance in The Farce, as if millions of algos cried out in terror and were suddenly silenced... [/Obi Wan]

Wed, 05/13/2015 - 14:02 | 6089993 collon88
collon88's picture

Since when is 1.8bps "whopping"?  Really? 1.8bps?  A 0.018% move is "whopping"?  Only in humongous size with 50:1 leverage I quess.  

Wed, 05/13/2015 - 15:26 | 6090376 disabledvet
disabledvet's picture

These moves are happening in the span of a single day.

 

Ridiculous.

 

Wall Street is so massively levered short they have no clue what an actual mid cycle correction in facts means other than "double down on that."

 

Friggin Trian lost billions greenmailing Dupont today.

 

We've already had an epic short squeeze in the dollar.

Wed, 05/13/2015 - 19:56 | 6091370 ThroxxOfVron
ThroxxOfVron's picture

"Since when is 1.8bps "whopping"?  Really? 1.8bps?  A 0.018% move is "whopping"?  Only in humongous size with 50:1 leverage I quess.   "

This is a tectronic move in the bedrock benchmark of economic strength upon which most of the planet has based valuations for debt and currencies and trade in debt in currencies.

It happened in 9 minutes?

Imagine what would hapen if the bedrock of Manhattan suddenly unevenly gapped: dropped or rose 1.8 inches in the span of 9 minutes of tectonic fury.

maybe as much as a tenth of the structures would be rendered unsafe if not fall, many of the subways would collapse and/or flood, there would be thousands of gas and electrical fires, a massive power outage that might take down parts of the entire eastern grid, and tens of thousands would be dead in just the immediate destruction and inferno..

A coupla inches.  That is all it would take.

 

Sometimes very little moves are actually very big moves.

Consider how tiny a blod clot it takes to cause amassive goddamned stroke...

Wed, 05/13/2015 - 14:07 | 6090006 Jim in MN
Jim in MN's picture

Missed the headline:

Blistering Blue Benchmarks

Maybe next time

 

Wed, 05/13/2015 - 14:20 | 6090048 edwardo1
edwardo1's picture

I wouldn't get too excited about today or yesterday's auctions unless you know that hands who were buying were strong. If it was a mixture of private money and foreign official money from non producer nations I wouldn't get overly excited.

Wed, 05/13/2015 - 14:34 | 6090098 Atomizer
Atomizer's picture

Derivatives market is asking for more love. We'll give you more free shit if you give us a second chance. I know, dating myself. 

Yeah Yeah Yeahs - Maps

http://m.youtube.com/watch?v=oIIxlgcuQRU&desktop_uri=%2Fwatch%3Fv%3DoIIx...

She has my wife's eyes, regrettably my wife still looks great at 49. Another great artist beat down by progressive messages to change the world. Start out good in beginning until the remaining on the plantation lyrics unfolded. 

Wed, 05/13/2015 - 15:20 | 6090339 fremannx
fremannx's picture

10 Yr UST yields aren't really collapsing. The correction above is just a minor pull back on the way to skyrocketing new highs... which, of course means collpasing prices ahead.

 

http://www.globaldeflationnews.com/10-year-u-s-treasury-index-yieldellio...

 

Wed, 05/13/2015 - 15:42 | 6090459 Atomizer
Atomizer's picture

IMHO, 5yr represent auto loans. 7 yr represent housing to refinance. Check the math. I may be incorrect, my math model doesn't look good. Someone is hiding the decline. 

Wed, 05/13/2015 - 15:51 | 6090523 Atomizer
Atomizer's picture

http://www.globaldeflationnews.com/10-year-u-s-treasury-index-yieldellio...

Overlay Quantitative Easing and equities ramp up. Use 3, 5, 7, 10 year treasures. Start with the above baseline. We can walk the chart back to reveal. Don't forget POMO infusion data. 

Thanks ZH. Awaiting new chart. 

Wed, 05/13/2015 - 21:37 | 6091621 TwoHoot
TwoHoot's picture

And then it finished the day at  2.28%

That is a lot of viberation - something is going to come apart in a spectacular manner....

Can you check the oil running at full speed under full load?

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