Sharp Squeeze, Highest Foreign Central Bank Demand Since 2009 Lead To Scorching 3 Year Auction

It just never fails.

Earlier today, the 3 Year was the only place on the curve that was trading special in repo, at a rate of -0.35% as shown in the Stone McCarthy chart below, with no shortages at any other point:

That, as regular readers know, has been a nearly flawless predictor of auction strength, and the potential for a short squeeze into the 1pm issuance.

Sure enough, moments ago with the When Issued for today's $24 billion in 3 Year paper trading at 1.188%, we were confident that as a result of the substantial short overhang, the auction would price well through the WI. It did so, and by a mile: the final high yield print was a whipping 1.174%, stopping some 1.4 bps through the When Issued.

So much for the pricing dynamics.

However, demand itself was scorching as well. While the Bid to Cover dipped modestly from 3.14 a month ago to 2.944, it was the surge in Indirect interest, aka foreign central banks, that made this auction memorable: at 62.8%, it was the highest since November 2009. And with Directs taking down 9.4% of the auction, it meant that Dealers would end up with just 27.8% of the final allocation: this in turn was the lowest since November 2009.

And so, once again, we get vivid proof that whenever stocks are suffering from a Risk Off moment, investors continue to pile into the safety of US paper, be it in the primary or secondary market.

Comments

[hedgeless_horseman]

Giant Green Candles* are apparently on sale, now, a dime-a-dozen!

Sell now while supplies last!

^{*100% Artificial.  Contains only tertiary derivatives.  Contains 0% actual demand for any underlying equity.} 

[Consuelo]

Brazil, Luxembourg, Ireland, Cayman, Switzerland   

[buzzsaw99]

anything over 1% is a steal imo

[HenryHall]

This auction was in the USA, though the article does not say so. USA finance is less and less relevant in today's world.

[Bay of Pigs]

CB demand, lol. It is the BIS or the William Dudley buying at the NY FED on their behalf.

[Consuelo]

++

ESF

[Dr. Engali]

"Market" volatility got you down? Get your MyRa today and you too can have 1.17% in your portfolio.

[buzzsaw99]

love the nirp repo rates.

Planet, Schmanet, Janet! [/Frank N Furter, Rocky Horror Picture Show]

Hey, Killian! Here is Subzero! Now…plain zero! [/Ben Richards, The Running Man]

[knukles]

Now that, my friends, is one hell of a strong auction, stopping 1.4 beeps through the WI, particularly for a 3 year maturity.
Getchur yield while they're hot (positive) ... remember, tons of non-USD paper in the 3 year range are now trading at NEGATIVE yields.
It's a no-brainer for the deflationistas

[youngman]

Who says Central banks do not control the markets now.....what are they doing buying Treasuries????

[pods]

Ahhh the sharp squeeze, the move that has saved many a man's bacon when they over-rev the engine in the bedroom.

When a short squeeze just won't save you, try the sharp squeeze.

[aliki]

only form of "revenue" they'll have soon

[Somewhat Evolve...]

Tylers! I'm bored over here! Help! Could you post a documentary or something soon today? I feel like there aren't enough videos for bored people like myself on ZH. Thank you!!!

[E.F. Mutton]

Were they offered 72 months to pay?  No money down? Easy credit terms?

[ThroxxOfVron]

How much debt does the US Treasury have to roll over in the next 12 months before a new Prez. is sworn in?

How much debt does the US Treasury have to roll over during the next 4 years after the next Prez. is sworn in?

[E.F. Mutton]

Enough to hand the collapse over to the next President - so the NWO can have their narrative of the Hero Negro President, and blame everything on the next President, who is starting to look like Trump.  Make no mistake, they will move heaven and earth to maintain his "Legacy".  But I think the laws of economics will catch up well before then.

[InnVestuhrr]

Treasuries UP

Shiny shit DOWN

I earned a very nice profit today selling a batch of treasuries that I bought yesterday :-))

[Consuelo]

Would be nice to see Rob Kirby come on here and give a paragraph or 3 about how this 'regularly scheduled' appetite for U.S. paper really goes down, and how the ESF makes sure that appetite never abates. 

[bid the soldier...]

"All ashore that's going ashore" cried the man with the megaphone on the bridge.  A few central bankers moved to the gangplank.

"Cast off" called the captain.  "Slow astern."

The enormous ship moved slowly from its pier out into the Hudson where the tugs were waiting.  The summer sun shone brightly on the words emblazoned on its stern.

U.S. PAPER

(formerly known as the S.S. TITANIC)

[Mr. Universe]

NARRATOR: In the bleak days of nineteen-eighty-three, as England languished in the doldrums of a ruinous monetarist policy, the good and loyal men of the Permanent Assurance Company-- a once-proud family firm, recently fallen in hard times-- strained under the yoke of their oppressive new corporate management.

 Pushed beyond the bounds of decent and reasonable victimisation, the aged retainers take their destiny in their own hands and-- Mutiny! And so, the Crimson Permanent Assurance was launched upon the high seas of international finance. There it lay, the prize they sought, the richest jewel in the crown of the I.M.F.: a financial district swollen with multi-nationals, conglomerates, and fat, bloated merchant banks. Hidden behind the faceless, towering canyons of glass, the world of high finance sat smug and self-satisfied as their future, in the shape of their past, slipped silently through the streets, returning to wreak a terrible revenge. Adopting, adapting, and improving traditional business practises, the Permanent Assurance puts into motion an audacious and totally unsuspected takeover bid. And so, heartened by their initial success, the desperate and reasonably violent men of the Permanent Assurance battled on... until, as the sun set slowly in the west, the outstanding return on their bold business venture became apparent: the once-proud financial giants lay in ruins, their assets stripped, their policies in tatters.

 PIRATE: Full speed ahead, Mr. Cohen!
CHORUS: Up, up, up your premium. Up, up, up your premium.
PIRATE: [singing] Scribble away! CHORUS: Up, up, up your premium. PIRATE: [singing] And balance the books. CHORUS: Up, up, up your premium. PIRATE: [singing] Scribble away! CHORUS: Up, up, up your premium. PIRATE: [singing] But manage the books. CHORUS: Up, up, up.
PIRATES: [singing] It's fun to charter an accountant And sail the wide accountancy, To find, explore the funds offshore And skirt the shoals of bankruptcy! It can be manly in insurance. We'll up your premium semi-annually. It's all tax deductible. We're fairly incorruptible, We're sailing on the wide accountancy!
PIRATE: [singing] Sail away! CHORUS: [singing] Up, up, up...
NARRATOR: And so, they sailed off into the ledgers of history, one by one, the financial capitals of the world crumbling under the might of their business acumen,... or so it would have been... if certain modern theories concerning the shape of the world had not proved to be... disastrously wrong.

[bid the soldier...]

I saw that show at the Wintergarden.

"Asset Stripper on the Roof"  Carl Icahn sang

If I were a poor man,

Ya ha deedle deedle, bubba bubba deedle deedle dum.
All day long I'd biddy biddy bum.
If I were a bankrupt man.
I wouldn't have to work hard.
Ya ha deedle deedle, bubba bubba deedle deedle dum.
If I were a biddy biddy poor,
Yidle-diddle-didle-didle man.

You know what all those yidles and deedles and bubbas mean?