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Tailing, Weak 30 Year Bond Auction Disrupts Treasury Long End
If yesterday's 10 Year auction priced stronger than expected during yesterday's NYSE-trading vacuum, today's 30 Year was the mirror image, with the Treasury selling $13 billion in 30 Year paper far weaker than the When Issued market had expected, resulting in a 3.084% high yield, a tail of 1.6 bps to the When Issued.
The internals were likewise on the weak side, with the Bid To Cover sliding to 2.231 from June's 2.535, as a result of a drop in both Direct and Indirect bidder takedown, from 14.4% to 8.1%, and from 52.0% to 51.1% respectively, leaving Dealers with 40.8% of the auction, the highest since April.
End result:a rather unpleasant jerk wider across the curve, with the biggest pain on the long end, which was quite unexpected in light of the big weakness in initial claims earlier today and the ongoing uncertainty surrounding both China and Greece, not to mention the ongoing deflationary commodity rout.
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'Prolly a good time to swap out of tips and intermediates....
Just sayin', folks, because the economy is doggiepoo and more likely to get another QE than higher rates, any more bad news overseas could trigger big additional collateral calls all when the CB's sucked up all the supply.
Chances that 3% looks good in another few years is very very good.
Regardless.
Guess I should sell my TBT
+.10 on the 10 now.
Evans just said Mid '16 for the next target rate hike? IMF cuts US forecast. Agree QE is about all they have left. All a conundurm. (add Puerto Rico)
As Schiff's been saying for a while: QE forever.
Winning.....
US bonds today are a horrible investment:
Fed says inflation in USA was 0.8% in 2014. Chapwood Index says it was 9.7%. So what are the consequences?
Let's use a Zero Coupon Bond Calculator to see the effect of fake inflation on a $1000 bond for 30 years:
A zero coupon bond is a bond bought at a price lower than its face value, with the face value repaid at the time of maturity
With Fed's 0.8% fake inflation, Zero Coupon Bond Value = $787.38
With Chapwood inflation of 9.7%, Zero Coupon Bond Value = $62.20
So with Fed's inflation assumption, you can borrow $787.38 for 30 years and pay $212.62 as interest
With Chapwood inflation, you borrow $62.20 for 30 years and pay $937.80 as interest
With Chapwood Index, if you borrow $787.38 for 30 years, you pay $11,871 as interest. Or 55.83 times that with the Fed's inflation adjustment.
http://www.chapwoodindex.com/
Laurence Kotlikoff: U S Treasury Bonds One of the Riskiest Securities in the World, Financial System Will Collapse Just a Matter of Whenhttp://investmentwatchblog.com/laurence-kotlikoff-u-s-treasury-bonds-one...
Who in their right mind would lend money to USA? Why don't they just print money and stop this charade of bond selling.
That's how they are printing 'muny'. They issue the bonds to themselves in a public sale that is never public before public notice (like above) that they sold themselves bonds with the money they've just printed from thin air by having a discussion about the bonds that didn't exist but now do.
See, clear as mud.
And we get to pay them real earned taxpayer $ interest for doing so. Gotta support that 5 Star travel/speaking budget. But they will give us back a slice (after taking out unaudited operating expenses and a 6% divy to member banks) to make us feel good about them.
When these idiots at the Fed lose control of the bond market, and they will. Game....Set....Match. Poof, all over!