$32 Billion 3 Year Auction Prices At Second Lowest Yield Ever, Record High Bid To Cover

Tyler Durden's picture


There was a time when the short end of the curve was not very loved, as all bonds 3 years and shorter were sold by none other than the Fed. Today, that is no longer the case, driven primarily by ever louder whispers that because the Fed is very much limited in its long-dated purchases as we first calculated last Friday, it may give up on sterilization entirely (since nobody really knows what the Fed will do, but 101% of traders are now certain it will do something), and proceed to monetize all maturities as all Stock considerations are thrown away, and everyone focuses solely on the Flow. Sure enough, the $32 billion 3 year auction just priced at the second lowest yield ever of 0.337%, with only the Sept 2011 yield of 0.334% lower. This was well inside the WI yield of 0.34% at 1 pm. Offsetting the yield "disappointment" was the spike in the Bid To Cover which rose from 3.51 to 3.936, the highest ever. Finally, looking at the internals, for the first time November, Dealers took down less than half of the auction, or 49.8%, with 36.8% going to Indirects, and 13.4% to the PIMCOs of the world, and other Direct bidders such as China. Of course, if there is disappointment on Thursday, and if Dealers have no choice but to keep buying the short-end as a result of the continuation of Twist, as sterilization continues, expect to see some disappointed buyers of today's auction, which incidentally together with the rest of this week's issuance will bring total US debt to a new record of just over $16.07 trillion, and rising very rapidly.

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Tue, 09/11/2012 - 13:21 | 2782311 TheCanadianAustrian
TheCanadianAustrian's picture

Does anyone else think we might be looking at endless stealth QE on short-term bonds combined with open-ended operation twist? Continually disappointing the markets while never allowing them to collapse?

Tue, 09/11/2012 - 15:11 | 2782750 LawsofPhysics
LawsofPhysics's picture

looking at?   WTF?  ZIRP is QE!!!!!!!!   There are no "markets" for treasuries.  The fucking Fed, owns the curve.  If you think savers and reitrees are getting screwed now, just wait until NIRP kicks in in earnest, then you can buy a treasury and pay the government to lose you money.

"winning"  oh yeah, bitchez...

Tue, 09/11/2012 - 15:58 | 2782922 TheCanadianAustrian
TheCanadianAustrian's picture

I think you misunderstood my comment. I meant "looking at" in reference to the charts, not in reference to the future.

My question was whether the fed's strategy this past year has been to "fool" the markets by making everyone believe that OT1-2 was a "step down" from QE when in reality was a cleverly-disguised QE3.

I mean why not? They can continue to pretend QE3 isn't happening because it's technically not the same thing. Instead of outright buying long bonds ala QE1-2, they do it in two steps by outright buying short bonds and trading them for long bonds through OT.

Tue, 09/11/2012 - 18:09 | 2783295 SafelyGraze
SafelyGraze's picture

the 10 year rate has steadily declined over the past 30 years from 14% to 2% 
or 0.4% per annum. the 30 year rate has similarly declined 

in essence, this action allows everyone the opportunity to buy the deficit and sell it to primary dealers at 0.4% per annum on the open market before the PD's flip it to the freserve.

haven't found a chart that shows the spread PD's make when the sell into the POMO. even if the spread looks small, a PD that buys up treasurys one week and sells them to the freserve the next week at 0.2% is making that spread in a single week -- looks like a 0.2% rate per week equates to an 11% rate per year. 

NIRP still make sense as long as you have a guaranteed buyer at freserve to flip to. 

Tue, 09/11/2012 - 15:14 | 2782758 helping_friendl...
helping_friendly_book's picture


"But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation."

Tue, 09/11/2012 - 13:23 | 2782320 Vincent Vega
Vincent Vega's picture

Loan an insolvent government money for 3 years at .33%! What a deal, where do I sign!?

Tue, 09/11/2012 - 13:47 | 2782415 timbo_em
timbo_em's picture

Just wait a few more years until financial repression has fully started and you won't even have to sign. Someone in Wahington will sign your buying order for you.

A year ago, Kyle Bass gave the US three to five years to really fix things. Today, nothing has been fixed, in fact things are now even worse than they were 12 months ago.

Tue, 09/11/2012 - 14:03 | 2782465 Vincent Vega
Vincent Vega's picture

You mean repression hasn't started yet? The government taxes (by force) me at 30+% and they will pay me .33 % to 'invest' in them? Yes, when repression hits I bet it will be bad.

Tue, 09/11/2012 - 15:31 | 2782822 timbo_em
timbo_em's picture

I wrote "fully started". And a quick look into history tells me, given the large pile of doodoo we are in (40 years of borrowing from the future combined with a tbtf financial system), we ain't seen nothing yet. Be it inflation, higher taxes or outright confiscation or whether people will be forced to lend their money to the government a ridiculously low rates, the bill is due and the US [and other western economies] will not be able continue to borrow 140B per month.

Tue, 09/11/2012 - 13:49 | 2782420 TonyCoitus
TonyCoitus's picture

No need to sign.  If you're an American, this step has been eliminated to help serve you better......and keep you in the dark.

Tue, 09/11/2012 - 13:23 | 2782325 mrktwtch2
mrktwtch2's picture

you cant short treasuries..for at least another year..only when the euro breaks up will you be able to..until then ..keep buying these occasional 3 to 5% pullbacks..

Tue, 09/11/2012 - 13:23 | 2782326 fonzannoon
fonzannoon's picture

The stock market today seems to tell me that the fed's mandate going forward is outright purchases of equities.

Tue, 09/11/2012 - 15:11 | 2782748 helping_friendl...
helping_friendly_book's picture

That is why State Street invented the ETFs. The FRBNY is buying and selling the SPY. I it the only way I can think of. They don't need to buy a bunch of securities, just frontrun some ETF's through their minions at JPM.

Tue, 09/11/2012 - 13:24 | 2782331 max2205
max2205's picture

30 yr @ 2.8. Refi @ 3.6

Fuck you Ben!!!

Tue, 09/11/2012 - 13:26 | 2782341 SheepDog-One
SheepDog-One's picture

10yr CD at .30....FUCK YOU BERNANK!

Tue, 09/11/2012 - 13:42 | 2782400 Meatballs
Meatballs's picture

Sorry guys, Ben is busy fucking you and everybody else. :)

Tue, 09/11/2012 - 13:32 | 2782369 MrJingles
MrJingles's picture


So if we want to play the game we can actually make money by borrowing a huge amount of money at a rate less than inflation and live for free.

Only in America bitchez!

Tue, 09/11/2012 - 13:25 | 2782332 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Rates must stay down at all costs and with China and Europe bankrupt the Fed is the only ticket to maintain the purchasing power (in nominal terms) of USTs.  This is why Bernanke must continue to print, leverage his books on his gold reserves (remember his Congressional testimoney when he acted surprised to know he had gold on his books), and be the buyer of last resort, for it is the last resort.

Tue, 09/11/2012 - 13:25 | 2782336 Robslob
Robslob's picture


Emberrasing...I can refinance on a 15 Year Jumbo mortgage for 2.875% 


Tue, 09/11/2012 - 15:13 | 2782756 LawsofPhysics
LawsofPhysics's picture

too bad wages actually matter.

Tue, 09/11/2012 - 13:26 | 2782338 yogibear
yogibear's picture

Bernanke and the Fed will end up being the only buyer. Buying up everything with print money.

Only thing that stops this is for the US dollar to go the way of the British Pound-Sterling. 

Constant counterfeiting and Fed enabling the contunuation of esculating of US deficits.

Tue, 09/11/2012 - 13:32 | 2782366 Vincent Vega
Vincent Vega's picture

DXY 79.83      Hello Pound-Sterling.

Tue, 09/11/2012 - 13:28 | 2782343 SheepDog-One
SheepDog-One's picture

Who needs QE when they can just sell $32 billion worth of bullshit bonds to themselves whenever they want?

Tue, 09/11/2012 - 15:26 | 2782691 helping_friendl...
helping_friendly_book's picture

That is the definition of QE.


"But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation."

The words of Ben Shalom Bernanke.

Tue, 09/11/2012 - 13:27 | 2782344 Silversem
Silversem's picture

We are going to see ongoing QE. There is no way back!.....I am long gold with cfd's.

Tue, 09/11/2012 - 13:30 | 2782355 Dr. Engali
Dr. Engali's picture

The "markets" are going to shit themselves if Ben does nothing. If he does do something he will need to print a trillion just to prevent a sell on the news.

Tue, 09/11/2012 - 13:32 | 2782371 SheepDog-One
SheepDog-One's picture

I sure hope thats how it plays out, although Jackson Hole flop yet again didnt do anything. These are just occupied markets run by terrorist manipulators. Rest of the public lulled into complacency like the dumb sheep they are.

Tue, 09/11/2012 - 13:32 | 2782364 yogibear
yogibear's picture

Complete collapse in confidence in the US dollar (hyperinflation) is the only thing that stops the Federal Reserve. 

Tue, 09/11/2012 - 13:36 | 2782381 Bay of Pigs
Bay of Pigs's picture

All Hail King Doelarr! 79 DXY. LOL.

What a bunch of bullshit this is...calling it Ponzi finance is being too kind.

Tue, 09/11/2012 - 13:52 | 2782430 kennard
kennard's picture

the $32 billion 3 year auction just priced at the second lowest yield ever of 3.37%

You read it here.

Tue, 09/11/2012 - 14:06 | 2782471 alfred b.
alfred b.'s picture


    Nowadays there is no need for a signature for most credit card  purchases under 100$...just wait in a year and half or 2 that limit will be raised to 500$.     Value of fiat sinking!

     Buy physical gold and silver.



Tue, 09/11/2012 - 14:09 | 2782484 Racer
Racer's picture



"The Newest Bank Fraud Scheme ("Risk Hiding")"

"At least seven banks plan to let customers swap lower-rated securities that don’t meet standards in return for a loan of Treasuries or similar holdings that do qualify, a process dubbed “collateral transformation."

Tue, 09/11/2012 - 14:50 | 2782670 helping_friendl...
helping_friendly_book's picture

Your link asks:

"Why don't we just call it what it is: Legalized accounting fraud."

We already legalized fraud in the system. The biggest being Repurchase Agreements (REPO). If you don't criminalize REPO then what the hell does it matter?

As long as a Bank or Corporation is allowed to cook the books every quarter, or everyday close for banks, how can regulators or investors know any thing?

Cash under my matress losing value to inflation beats the hell out of trusting any accounting system which allows straight up book cooking with repurchase agreements. 

We are in for another catastrophe. There will be one country, probably Germany, that will not stick with the program (monetizing all of your debt) and when everyone else notices all those poor investors will be running for the exit all at the same instant.

The banks and hedge funds can't help but play until the music stops.

It's too late to buy silver for me. I had a position in SLV but, had to sell at $12/share when I had surgery. At least my family has a farm.

The victims will get younger and younger and, one day, will be young and sassy enough to raid the Hamptons for some payback. I look forward to that day.

Tue, 09/11/2012 - 15:38 | 2782849 Urban Redneck
Urban Redneck's picture

swaps and repos as camouflage for risk is an almost ancient banking accounting gimmick

swaps, repos, and other derivatives for senile-saver-Granny... because there are no bigger fools left amongst the professionals would be a very frightening development

Í thought the Taxachusetts Saviors- Barney Fag and the Lyin` Injun, were supposed to save the American Consumer and Economy from this sort of thing, couple thousand plus pages of legislation for what?

Tue, 09/11/2012 - 16:46 | 2783112 helping_friendl...
helping_friendly_book's picture

I hear ya'. I'm in the Old Dominion also. 

It seemed so obvious when I found out what a CDS actually was. The answered seemed simple:

If you want a pay out on a CDS you must prove you owned the bond BEFORE the default.

I just feel bad for all the families and individuals suckered into killing each other in all the endless wars of agression I have witnessed in 48 years.

Divide and conquer.

I have been living in a lie for all these years. We all know it is a lie yet most are in denial.


Democrats and Republicans are all the same. Lying douche bag politicians.

The internet has, at least, dropped the veil for many to stop denying and see the truth. 


Tue, 09/11/2012 - 14:46 | 2782657 q99x2
q99x2's picture

Costs a lot to rig an election.

Tue, 09/11/2012 - 15:24 | 2782778 helping_friendl...
helping_friendly_book's picture

Soon cash will become "unavailable" and "unnecessary" because of the advances in banking technology. Direct Deposit will be required and a fee will be charged for withdrawling cash or cashing a check. It is the definition of negative interest.

People with cash will be considered criminals and the cash will be confiscated forthwith. 

Use of the debit card system will become manditory for all transactions.

You will be happy to take 0.33%.

I wrote my senior term paper on 1984 but, I never imagined such sophistication.

We are done here folks. 

Tue, 09/11/2012 - 15:43 | 2782864 Crabshacker
Crabshacker's picture

I bought some on e-bay

Tue, 09/11/2012 - 15:59 | 2782925 Haager
Haager's picture

...from a dealer in Hong Kong, which you simply forgot to add. Will be shipped asap.

Do NOT follow this link or you will be banned from the site!