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Lowest Bid-To-Cover Since 2009 In Ugly, Tailing 5 Year Auction As China Dumping Story Picks Up Steam
While yesterday's ugly auction can be attributed mostly to the tumble in repo "specialness" heading into the auction, perhaps as a result of a surge in supply coming from China, today's just as ugly 5 Year had one catalyst: the one which Zero Hedge broke first last night - concerns about China selling.
As the following table shows, going into today's auction, the 5Y was barely negative, or -0.01% in repo.
The uglyness started at the very top, with the pricing of 1.463% a tail of 0.6bps to the 1.457% When Issued. But the biggest concern was the bid to cover of just 2.34: this was the lowest BTC since July 2009.
Worse, and confirming that China is clearly out of the market for the time being, was the Indirect take down, which at 50.1% was the lowest since October and with Directs of 7.3% not stepping up, it meant Dealers were stucking holding 42.5% of tthe auction, the lowest since January 2014.
Why: because as we first reported last night and as virtually every bond desk today is confirming today, China is not only not buying any more, but is actively dumping US paper here. For the sake of the Fed, we can only hope that said dumping will not continue indefinitely because very soon the market's natural ability to soak up paper (recall equity sellers are traditionally bond buyers) will be exhausted very fast, and then the debate whether or not the Fed should do QE4 will become moot very fast.
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No BUSH, No CLINTON, foreva!
yeah..sure..!
So you think 3% on the 10 yr and a recovered stock market?
You're crazy, I like you, but you're crazy.
B O N D S
James Bonds
What the market needs right now, since Goldfinger is nowhere to be seen. Here, pull this, quick ...
This is very interesting. If there is a flood of US bonds over the next months, will it draw capital out of equities and into cheap notes? What interest can the U.S. afford to pay for its debt load? $20T+ at 2%? 5%?
Currency wars are hotting up...
But Paul Krugman says there's not enough debt?
As long as you are loaning conterfeited money, I guess that's true. If you came by it honestly, you might be more interested in calling it back.
Krugman is the Ellsworth Tooey of economics.
"But Paul Krugman says there's not enough debt? "
Then Kruggles should take us all out to dinner and put it on his card.
oops
If your buying Treasury bonds as a safe investment at the present rates you deserve what you'll get.....
QE cannot float everything. There are still American assets to steal/bail-ins but that resources may be needed to fund the upcoming war. With China selling 106 billion treasuries you would have thought that something very large would be exploding by about now..... again.
It's not QE, the FED basically exists to buy all the debt that the government can generate. QE is ass-covering icing on the turd cake.......
I get that part but I definitely don't understand how we are not Zimbabwe yet. It seems like they are spreading out the risk to everybody until it blows but why hasn't it blown? Or, has it and you just haven't heard the scream yet? And if China is selling US treasuries, devaluing their currency and not really supporting their market where is the 100 billion going?
QE never made it into the real economy. It went to the mega-banks and their stock holders to line their pockets and to the casino as ZIRP loans for stock buybacks and magic bonds....
"For the sake of the Fed, we can only hope that said dumping will not continue indefinitely because very soon the market's natural ability to soak up paper (recall equity sellers are traditionally bond buyers) will be exhausted very fast, and then the debate whether or not the Fed should do QE4 will become moot very fast."
Well how do we know the FED hasn't USED the TAF Auction Facility Programs to provide the cash to Foreign Country Allies to entice them to purchase US Treasuries??
If you look at the Many poor countries holding US Treasuries in the TIC Data, you have to ask how they got the money!!!!
How!!!
http://www.treasury.gov/ticdata/Publish/mfh.txt
Where did Turkey, Poland, Mexico, Philippines, Vietnam, Ireland, Canada, Taiwan ... get this Big Coin!!
Ireland, $217.7 Billion... While simultaneously a PIIGS and by magic their Debt Problem is said to be solved too.
More Magic. External Debt for PIIGS, England & Nederlands is still huge RISK.
The Fed will buy any excess. There will always be a bid for this stuff by them. There will never be a U.S. Govie bond collapse. It might not be used as a benchmark by the private sector, but rest assured the Govt will not suffer the effects of a bond failure.
*Alibaba staff told to focus on their jobs* Chief Daniel Zhang has told staff, many of whom are shareholders, to "forget about the share price" and concentrate on their work as the stock for the first time sank below its $68 issue price. After listing in September, shares hit $119 in November." FT Wed. 26 AUG 2015.
I thint here is a fairly high probability that China's government allows retail investment offshore before the end of this calendar year.
Think about it, they have a bunch of very pissed off 30-somethings. With computer skills. They have a $3 Tril stash of US securities. The only Chinese who have managed to invest offshore are gamblers who pay Adelson to get their money out, or government apparachiks. Which is what is so annoying to us in Calif. That empty house at the corner is owned by a mobster or a Maoist.
"Dumping US Treasuries" as this dunderhead suggests is happening, is an act of war. China is allowed to sell its US reserves, especially when it needs to stabilize its exchange rate. For years they have been more interested in keeping the thing from strengthening, hence buying USD and then parking them in T's at the FED. The opposite is normal, even if the numbers are very large.
But a policy change so that there is a retail overseas investment process in China....that is a game-changer. (and it would be game-on here.)
Aircraft carrier/s en route to the 'sand castles' yet...? Big Yawn if not.
Remember China is a Primary Dealer...