30 Year Prices At Highest Yield Since August 2011

Tyler Durden's picture

As has been noted all this week, starting with Monday's 3 Year auction which printed at the highest yield in 5 months, the $12 billion 30 Year Bond did not surprise, and at a yield of 3.381%, just inside of the When Issued 3.385%, it priced at the highest yield since August 2011, or just days after the US downgrade. The Bid To Cover was 2.70, on top of the TTM average of 2.68. Take downs were a carbon copy of February, coming at 14.7%, 29.0% and 56.3% for Directs, Indirect and, of course, Dealers. Does the yield have a ways to go? Oh yes - back in February 2011 the 30 Year priced at 4.75%, and then the slow steady decline commenced. What happens next? Will the US need another downgrade for yields to paradoxically slide? Or will the Fed truly leave the UST curve untouched by phasing out its market subsidization? Hardly: as a reminder, here is where we stand: $1 trillion in bond issuance in the next 10 months, and $100 billion in bond sales by China in December (with the latest TIC data pending). Forget stocks, and keep your eyes glued to the bond market. Things are starting to get interesting, especially for the Fed whose DV01 of $2Bn means that every basis point rise in yields means less P and more L. But the scariest implication: recall why the Fed wanted low rates - to spur mortgages and refis. It seems that Bernanke has finally given up on this. The only mandate left now is to blow the NASDAPPLE bubble to 2000 levels. At which point everyone can retire with paper profits. Until the cash profit taking begins of course. Then... it will be someone else' problem.

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Mr Lennon Hendrix's picture

<-----Bonds collapse first

<-----Stocks collapse first

economics1996's picture

Bonds first when people realize the CDS are worthless.

donsluck's picture

CDS may turn out to be a very profitable (and risky) bet IF the counterparties are bailed out. CDS coverage and ECB margin calls are two other reasons PMs are down. This is temporary.

TruthInSunshine's picture

If The Bernank can't lid 30 yr tnotes at 3.415%, he has minutes left.

That was the contract he signed with the Luciferians when applied for the job, and his signature is authenticated as valid (in puppy blood).

 

Molech is not happy, Dr. Ben S. Bernanke; you pledged your allegiance to the 46' Owl during a human effigy ceremony, and you shall now come to terms with your fine print in the contract with the dark forces for whom you've worked.

 

Let this be a lesson to all; never sell your soul, because it will be collected ultimately.

clones2's picture

Lower bond prices mean higher rates and higher deficits which equal more money printing... and higher equity prices.

I see no reason why this won't be the case for the short to mid-term...until it doesn't...

clones2's picture

Pretty sure this is the first step to inflation followed by deflationary collapse...

Manthong's picture

"cash profit taking"

I can't remember the last time I heard that term used.

VanceEva1's picture

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Contra_Man's picture

TBT-NYSE ($US) or HTD-TSX ($CAN)... humm

Conman's picture

Given that this ponzi market must go on forever, and the fed can do whatever they want becase theres only temporary inflation what do you think.

SheepDog-One's picture

'The Ponzi must go on forever' is not a given at all, bottom line what theyre doing is monetizing the debt before they collapse the country....judging by the amount of monetization already done, the time is up.

kito's picture

sheepie, are you changing colors on me? you know the only monetzing over the past 8 months has been in the form of promises...and even those promises have run dry..

 

But the scariest implication: recall why the Fed wanted low rates - to spur mortgages and refis. It seems that Bernanke has finally given up on this.

poor bill gross, bitchslapped time and time again by ben....

Practical Irrationality's picture

But the scariest implication: recall why the Fed wanted low rates - to spur mortgages and refis. It seems that Bernanke has finally given up on this.

I'll take the contrary view: Headlines on media sites all blowing up with scary "Rates are going to rise! Now is the time for a new mortgage." talk is just there to scare mom and pop into refi and/or buy right now. The Fed has to prop up those Spring mortgage numbers somehow and force some construction.  Bernanke can't afford to let the rates get too high or risk other problems.

 

battle axe's picture

Very good LH, I hit Green arrow as much as I could...Bonds will go boom big.

Gubbmint Cheese's picture

If bonds collapse, the cost of servicing the debt skyrockets - a 1% increse in rates costs $150B in additional debt servicing.. good luck with that.

Silver Bug's picture

The bond market is one of the BIGGEST Bubbles in history. People are completly insane if they think they are all going to be paid back.

 

http://silverliberationarmy.blogspot.com/

Bastiat009's picture

Nobody invests directly into that market. Banks do it with money that belongs to poor suckers or money that was just given to them by the Fed. No one in this market cares if they will get their money back. In the meantime, they enjoy the monthly return and buy real stuff with it.

Non Passaran's picture

Of course. Everyone is backed by their CB. Everything is perfect!
A perfect scenario for PMs, though. As a commenter above observed, this is "peak insanity". Enjoy it while it lasts. Next avalanche of money could take us straight to high inflation. Now is good time to buy.

SheepDog-One's picture

So FED still successfully monetizing the debt then.

donsluck's picture

Perhaps, but temporarily the rising interest is poison to the PM market. Who knows how long the "temporary" will last. This is a PM buying opportunity.

scatterbrains's picture

even with so many recent paper longs trapped under water and before they spike margins up their ass ?  Or do you mean wait for the climatic sell first ?

 

donsluck's picture

Unfortunatly I don't think you can time anything with that degree of accuracy. My plan is to wait until the prices turn for a couple of days then buy.

LiquidityandLunacy's picture

Im doing a good job of reverse monetizing my money into PMs and Sandwiches.

SheepDog-One's picture

Little Debbies keep well long term.

Antifederalist's picture

Houston, we have a problem.......

ableman28's picture

The frequent references to Chinese and Russian sales of US Treasury paper aren't completely clear.  Both of those countries hold a combination of short and long maturities.  If the Chinese and Russians have been selling older long term maturities they may simply be motivated to cash in on original vs. current market value of paper issued at 5%.  Current returns on 30 year paper sold prior to 2009 are, depending on the date of the original issue, phenomenal.

 

HurricaneSeason's picture

China's total U.S. treasury holdings went down $100 billion in 1 year. They used to buy $30 billion a month in mortgage backed securities and treasuries(prior to the big bang) and that pretty much was equal to our annual deficit at $360 billion. Now they're trying to sell the same junk we're selling when they need to be buying $100 billion a month. Russia has the same plan.

Bastiat009's picture

The Fed is doing a fantastic job. US banks are strong and the US$ is robust. Gold is crashing and the US government can borrow and spend as much money as it wants to help friends in need. The Fed is like a good doctor saving very sick friends. You can't blame a doctor for not saving people who are not his patients. The Fed saves a few bankers. That's what it's for. Great job Ben. I wish I was one of your friends.

Sutton's picture

Bill Gross is really long I think.

After being really short last year when 10's were near 4%.

He's on the outs with Ben after his critical missives about Ben's madness.

Tough being like everyone else.

knukles's picture

Do you know how to spell "whiplash", Bill?
You do?
Of course, we all knew you did.

 

gjp's picture

No problem.  The Fed (and their dealer friends) will just fund the deficit with all that AAPL stock they've been buying.

Cognitive Dissonance's picture

To hear former Fed governor Larry Meyer tell us (starting at 11:30 in the clip). 

"With respect to inflation, any central bank can control inflation. That's kindergarten stuff. You raise rates enough, you bring down inflation."

Right!

Then what happens to the US gvt debt service obligations Larry?

ZIRP was, and remains, the last bullet in the Fed's gun Larry. I dare you, I double dare you, to raise interest rates and stop printing.

Go ahead. I'll wait.

http://en.wikipedia.org/wiki/Laurence_Meyer

 

donsluck's picture

Funny. Kindergarten stuff, don't forget to hold hands crossing the street, and always share.

knukles's picture

Whoa! 
Hold the boat, dude!
No second order, ancillary, direct or indirect, casual or implied let alone down right fucking no nonsense sure as the sun rises in the East and Goldman will fuck you over (They don't even leave a chicken feather up your butt and cry fowl, anymore you slobbeing muppet.) there is nothing other than the uber narrow idological syllogistic logic that "if there is inflation, it can be controlled".
Kid's shit simple.
(As in "Trust me, I'm in advertising", said Don Draper)

Jesus Cog, don't ask for so much from the all seeing wise intellectual altruistic people who in part have such a significant influence upon the very destiny of mankind.  

Find your place in the corner and sit quietly.

Cognitive Dissonance's picture

Sorry. My bad.

Won't happen again.......today. :>)

bobola's picture

"With respect to inflation, any central bank can control inflation. That's kindergarten stuff. You raise rates enough, you bring down inflation."

I love the fact that he and Summers share the same first name.

New term - we've been 'Larried'.........

roadhazard's picture

Or if it's a really bad screw up a, "Frasier Crane."

GeneMarchbanks's picture

'ZIRP was, and remains, the last bullet in the Fed's gun Larry.'

Notional GDP targetting is next, ask Romer. Then, it's over... maybe.

Cognitive Dissonance's picture

I agree that there are several tricks that remain up their sleeve and that they will try them all. But their ability to hide the exponential problem from "We The People" is rapidly ending. Even my most stubbornly dense clients are finally coming to that realization.

Watch the clip from the beginning. Even "Joe" and "Lies-man" are recognizing that the Fed is not the savior of the world and that something stinks at the Fed. Meyer admits that inflation of 4 or 5 % is unacceptable to the average Joe. Thus the reason they lie about inflation.

SheepDog-One's picture

They have NO other tricks except 'monetize the debt', thats all there is going on here at all.

Cognitive Dissonance's picture

Ultimately their 'trick' is to call the same trick many different names and to use several creative' methods to push the paper. That works well......until it no longer does. They manage perception, which in turn manages the faith and belief upon which the entire corrupt system rests. Remove this and the stinking edifice collapses.

CvlDobd's picture

Every day I am sure peak insanity has been reached and every day another comes along to prove me wrong.

JPM Hater001's picture

I'm going to need a urine test from the Yeilds please.

Village Smithy's picture

Be careful here. We've known for a while that one of the big factors holding treasury rates down was the uncertainty in Europe. That uncertainty hasn't changed in reality, only in the MSM wonderworld. If there is a mis-step in Europe yields will fall back quickly. Just sayin'.

Bastiat009's picture

And still not a word on the gold crash on this site which is like most media reporting only stories that fit into a narrative.

Sophist Economicus's picture

1.5% = crash?

 

Are you the sensitive type?