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Lack Of Short Squeeze In Today's 30 Year Auction Lead To Weak Demand
Following two very strong auctions earlier this week which as we showed previously had a massive short heading into the 1pm deadline, we made a simple prediction: because there was virtually no short overhang in the 30Y this morning, with the paper trading 0.11% in repo...
... we expected the auction to turn out ugly.
3Y and 10Y auctions had huge short into them, and auctions were stellar. Today's 30Y has zero shorting ahead of 1pm suggesting weak outcome
— zerohedge (@zerohedge) May 14, 2015
This also follows our warning from yesterday when we said that "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. "
Sure enough, an ugly 30 Year auction is precisely what we got moments ago when $16 billion in 3 decade paper was sold at a 3.044%, the highest yield since November, and a whopping 1.8bps tail to the 3.026% When Issued.
Just as bad was the Bid to Cover which has barely budged in the past three auctions, scraping the bottom at 2.20, essentially tied for the lowest level since the financial crisis.
The internal breakdown was less relevant but showed that Directs took down 11.1% of the auction, with Dealers getting 38% and Indirects left with 50.8%, the lowest since March.
And while overall the auction was not dramatically weak, we have now confirmed that the shorting in repo is now the biggest tell when it comes to auction days. Look for this to be promptly arbed by the new generation of bond trading algos.
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Good call, Tylers.
yeah, nice work.
Who is in line to buy these horseshit bonds of nothing in the first place?
Oh, yeah, right, the four headless horsemen.
Just like who did you ever know to benefit from a rockafucker foundation grant besides PBS? They have over 600 foundations, all tax shelters.
Maybe one of them buys bonds at the auction. Saving the world one ponzi at a time.
makes perfect sense; had a quick spike-up in rates into a 10-year auction (strong demand) to hedge in-case the same thing that happened last week: run up from the lo 2.2's up to to the mid-2.3's only to have "someone(s)" bang rates lower. investors who are yield-starved HAVE TO go somewhere but want the duration tightened up extremely short. nobody buying that this inflation lie gonna be able to go on forever so why lock-in around 3% out 30 years? thought this article was kind of interesting, coming from all places CNN where i keep reading how everything is all good & there is "no inflation anywhere":
People in Germany are going crazy for gold - Germans are buying gold at a frantic pace: CNNMoney
http://money.cnn.com/2015/05/14/investing/gold-germany-europe-ecb/index.html?iid=HP_LN
such deep analysis....maybe zro should look into the fact that this auction was for $16 billion, as opposed to the normal $13 billion, which would equate to a stellar bid to cover of 2.71.
but who would be interested in hearing that, right? not the MSM. but here in zero i would expect at least the arithmetic to be above par.
harsh, braz. nothing deep about today's action. the squeeze is in equities with all algos on deck, ballz to the wall.
all about the algos/quants re-setting for any notion of a 2015 rate hike based off that PPI data from this morning (April Headline PPI M/M -0.4% vs +0.2% consensus; March +0.2% ... April Core PPI M/M -0.2% vs +0.1% consensus; March +0.2%). according to "their data" there is no inflation, rather deflation. same people who told me last week that food prices had hit a 5-year lo (im just guessing we shop at different food stores, eat at different restaurants). anyway, just further proof there is no fucking way in hell they are raising rates this year so, up, up, and away (for today).
There you go with that reality shit again . . .
Janet says the long end is cruisin' fer a bruisin' -- Tyler says ain't no shorts to cover . . . what more do you need to know??
You gotta get yer game on, buddy -- 'cuz that's all it is: a game.
If they didn't gauge the market now and then, by allowing it to fly without intervention, they would not know how much to intervene the rest of the time.
also have M&A all over the place last few weeks + today ... AVP (whether its true or not almost irrelevant as stock starting to climb again), ANDE being talked about as a target, and CA doing a break-up. quants/algos just not letting off the buy button as supply leaves the market and best IPO year-to-date in the public markets is a fucking burger stand.
As bond yields begin to accelerate upward, prices will collapse in response. So it should be no surprise that weak demand is the overriding characteristic of bond sales these days. The 10 YR UST is a good example...
http://www.globaldeflationnews.com/10-year-u-s-treasury-index-yieldellio...