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Auction Which Sends US Debt To Over $15 Trillion Has Very Weak Reception; Drags Treasury Complex Lower

Tyler Durden's picture





 

Today's epic risk rally has been punctuated by something probably not all that surprising: a very weak $29 billion 7 Year auction, which has since dragged the entire bond curve even lower. The bond priced at a high yield of 1.791%, a notable 3 bps tail to the When Issued which was trading at 1.76 at 1 pm. But the internals are again where the action is: the Bid To Cover of 2.59 was the lowest in the series since the 2.26 back in May 2009! Additionally it appears that foreigners, either China or Europe, had very little desire to load up on this paper, with just 33.9% in Indirect Take Down, and a corresponding 86.9% hit ratio on the Indirects. So while Indirects came at the lowest since June, so the Primary Dealers took down the most since that month, at over half of the entire auction, or 54.15%. Directs also stepped up, bidding up 11.95% of the whole, compared to 8.95% last twelve auction average. And as the chart below shows, the disappointing auction has dragged the entire treasury complex lower in price. As a reminder, this bond auction brings total US debt to over $15 trillion, a number which would have resulted in a 100%+ debt/GDP using the Q2 GDP. As it sands, following today's update, the market has about $160 billion in capacity before that threshold is breached again.

7 Year monthly summary:

And entire UST curve post auction:

 


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Thu, 10/27/2011 - 13:21 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Gee I wonder where interest rates might be heading?  Quick America (and the U.K.) refocus everyone back on the Euro.

Thu, 10/27/2011 - 13:33 | Link to Comment Leopold B. Scotch
Leopold B. Scotch's picture

But Benji's got that under control.  Why, he can do anything he says!

What a tangled web we have weaved.

 

Thu, 10/27/2011 - 13:47 | Link to Comment Unprepared
Unprepared's picture

THAT's the big dilemma facing the global economy, in my opinion.

The global economy has to be permanently kept within a thin goldilock state of a thick blinding uncertainty between expectations of collapse and solutions.

Persistent Risk OFF: No potential growth - system collapse

Persistent Risk ON: first signs of growth - skyrocketing interests on suffocating debt levels - system collapse

Gone are the days when uncertainty was bad for the markets

Thu, 10/27/2011 - 13:58 | Link to Comment dwdollar
dwdollar's picture

Persistent Risk ON: first signs of "growth" - skyrocketing interests on suffocating debt levels - system collapse

There, fixed it for you!

Thu, 10/27/2011 - 13:22 | Link to Comment hunglow
Thu, 10/27/2011 - 13:40 | Link to Comment iDealMeat
iDealMeat's picture

+1,  We all need a whole lot more of that stuff..

Thu, 10/27/2011 - 13:23 | Link to Comment spiral_eyes
spiral_eyes's picture

i love it. the treasury bubble is being pricked by a pin...

http://azizonomics.com/2011/10/23/gold-in-2012-the-coming-bond-crash/ 

Thu, 10/27/2011 - 13:24 | Link to Comment Cyrano de Bivouac
Cyrano de Bivouac's picture

Stands.

Thu, 10/27/2011 - 13:31 | Link to Comment slaughterer
slaughterer's picture

Where is the Fed going to get its deflationary nightmare to launch QE3? 

Thu, 10/27/2011 - 13:26 | Link to Comment Eally Ucked
Eally Ucked's picture

The only question is - where the market gets all that money to buy any shit coming on the board?

Thu, 10/27/2011 - 13:37 | Link to Comment DormRoom
DormRoom's picture

frack.. high US stagflation coming next couple of quarters.  I welcome the new crisis.  real economy trying to readjust, but government interventions, doing god-head (Goldman Sachs) work, prevents it.

distortions on top of distortion; pushing out future waves will amplify the problem, until ---

Future adjustments to rebalance real global economy, and not shadow economy,  will be epic!

 

sets up hyper stagflation in developed countries. hyper-inflation for BRICs.

#occupywallstreet

Thu, 10/27/2011 - 13:29 | Link to Comment SeverinSlade
SeverinSlade's picture

Mind boggling how completely stupid and ignorant people are with regards to what is going on with currency/economics.

Thu, 10/27/2011 - 14:05 | Link to Comment NotApplicable
NotApplicable's picture

Not really. There's been a century of government schooling to make sure there's hardly anyone left alive with any sense. Which of course, is the danger of immortal institutions. Mortals can only keep them in check for so long before they are replaced with younger mortals without sufficient background to understand the danger.

Thankfully, I live where home-schooling is well protected by an entrenched Christian population, that will under no circumstances give up the faith.

Thu, 10/27/2011 - 13:31 | Link to Comment jcaz
jcaz's picture

Hello China?  You guys SURE you don't want some Treasuries?  Please?   Umm, where were you guys today? 

-Timmy Geithner, Master Bond Salesman

Thu, 10/27/2011 - 16:24 | Link to Comment blunderdog
blunderdog's picture

Backed by the full power of faith in the usa gummit ...er....or something like that.

Thu, 10/27/2011 - 13:29 | Link to Comment Trad3er_1337
Trad3er_1337's picture

Anyone here getting the feeling that today is overdone?? So extreamly bulish... Feels like this things about to pop...

Thu, 10/27/2011 - 13:38 | Link to Comment Randall Cabot
Randall Cabot's picture

I'm buying FAZ at the end of the day.

Thu, 10/27/2011 - 13:31 | Link to Comment afdestruction
afdestruction's picture

Man, my TMV holding looks pretty sweet today...

Thu, 10/27/2011 - 13:32 | Link to Comment Tsar Pointless
Tsar Pointless's picture

Tick tick BOOM!

Coming to a United States of America near you!

Thu, 10/27/2011 - 13:32 | Link to Comment tim73
tim73's picture

Pendulum might be starting to swing back from Europe to USA and it is a big wrecking ball. USA could be facing the end of the road. There are no other options left except massive printing of money.

Thu, 10/27/2011 - 13:32 | Link to Comment slaughterer
slaughterer's picture

China is saving up for the ESFS backstop.  Cannot afford US Treasuries anymore.

Thu, 10/27/2011 - 13:38 | Link to Comment LawsofPhysics
LawsofPhysics's picture

No, China has plenty of treasuries to sell.  Just better do it quick.

Thu, 10/27/2011 - 13:33 | Link to Comment Mr_Wonderful
Mr_Wonderful's picture

This stock rally has been sending very strong signals that no more QEs are needed. This is very good news for the FED since it is practically bankrupt, being leveraged 50-60 to 1 against its capital. As bonds tank the FED is quickly being rendered technically insolvent (although it quietly adopted an accounting change last January, allowing it to book any losses as a liability to the Treasury) so it can start selling part of its portfolio, in other words contracting the money supply. It´s practically forced at this point.

Thu, 10/27/2011 - 13:37 | Link to Comment LawsofPhysics
LawsofPhysics's picture

LOL! yeah, good for the Fed, bad for those liable for their losses - The American taxpayer.

Thu, 10/27/2011 - 14:13 | Link to Comment earleflorida
earleflorida's picture

hmmm

let's look at the three options shall we:

Social Security

Health Care/ Medicare/ Descretionary

MIC

me thinks its more guns, and less butter,... after all a bad diet effects your health and your longevity - a two fer

answer:  let them it mud-cakes, their quite popular in Haiti  

** Defense trumps All Logic** 

Thu, 10/27/2011 - 19:49 | Link to Comment optimator
optimator's picture

"Guns will make us powerful, butter will only make us fat."

Reichsmarshall Herman Goering

Thu, 10/27/2011 - 13:40 | Link to Comment RobotTrader
RobotTrader's picture

Just watch what happens to stocks

When just a fraction of that "hot money"

Rotates out of fixed income and "flees" back into stocks.

Where will the Dow be after we have 40 consecutive weeks of stock fund inflows and unemployment is back to normal at 5%?

Just check out the charts of INTC and WMT, somebody loves those dividends.

Thu, 10/27/2011 - 13:43 | Link to Comment jdelano
jdelano's picture

unemployment back to normal at 5%

right around the time the retirement age moves to 70 in italy.....

Thu, 10/27/2011 - 14:07 | Link to Comment Incubus
Incubus's picture

the official retirement age and the age you get to retire at are two different things.

 

Officially, it's there to get dumbasses to invest their lives into a system.  You work until you die, or until you can't work anymore and you're out on the streets.

Thu, 10/27/2011 - 13:45 | Link to Comment LawsofPhysics
LawsofPhysics's picture

So you are making a call for 5 % unemployment.  By when Robo, come on don't be shy, make a forward prediction that everyone can trade on. You crack me up, no shit we all love dividends, tis the season.

Thu, 10/27/2011 - 14:21 | Link to Comment earleflorida
earleflorida's picture

yep,... if i recollect correctly - it was the utilities [over-leveraged] dividends that brought about the "29" crash

but were talking apples and oranges,... right? 

Thu, 10/27/2011 - 13:49 | Link to Comment faustian bargain
faustian bargain's picture

'normal'...I don't think that word means what you think it means.

Thu, 10/27/2011 - 13:48 | Link to Comment Mr_Wonderful
Mr_Wonderful's picture

Well, the stock market, the bond market and commodities are all sending a very strong plea for the contraction of the money supply. I don´t see how it can be read otherwise. These are signals of rising inflation and interest rates. It can´t be good for an economy that is 70% driven by overindebted consumer spending.

Thu, 10/27/2011 - 13:54 | Link to Comment LawsofPhysics
LawsofPhysics's picture

No it isn't.  So the big question is, is the world economy broke or not?  Are you suggesting sovereigns might actually revert away from the global economy?  Regardless of the money supply, it takes resources and energy to keep the world economy "growing".  Infinite growth on a finite world, not going to happen.

Thu, 10/27/2011 - 14:07 | Link to Comment Mr_Wonderful
Mr_Wonderful's picture

It´s probably technically broke. As you have seen in recent years paying debt has somehow become optional, at least for select players. It´s a very dangerous sign from overindebted systems in terminal decay. The system has definitely been getting increasingly unstable. The stock market has crashed by 50%, twice in the last decade. Now we have yet another wild bear market rally. Looks very ominous to me.

Thu, 10/27/2011 - 14:32 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Agree.  I bought about $1,000 worth of rubles when I was in Russia in 1996.  15 years later that fiat is worth almost $75,000.

No question who is winning the race to the bottom.

Thu, 10/27/2011 - 14:54 | Link to Comment Mr_Wonderful
Mr_Wonderful's picture

Really? What about the three zeros they chopped off in 1998?

Thu, 10/27/2011 - 15:29 | Link to Comment LawsofPhysics
LawsofPhysics's picture

If it wasn't, then it would be closer to 2,500,000.

Thu, 10/27/2011 - 15:39 | Link to Comment Mr_Wonderful
Mr_Wonderful's picture

I hope you´re not deep into the Iraqi dinar redomination scheme.

Thu, 10/27/2011 - 16:36 | Link to Comment LawsofPhysics
LawsofPhysics's picture

No, work with some folks in St. Petersburg.  They "get" capitalism. Same as it ever was.

Thu, 10/27/2011 - 13:52 | Link to Comment spartan117
spartan117's picture

Holy crap, the USDX is REALLY getting butt raped here. 

Thu, 10/27/2011 - 15:08 | Link to Comment Living_Stone
Living_Stone's picture

"Holy crap"

"butt raped"

What are you a mormon?  Come on.  Out with it.  This is ZH!

JESUS FUCKING CHRIST, the greenback is getting skull hammered.  <fixed>

 

Thu, 10/27/2011 - 16:02 | Link to Comment pods
pods's picture

Doesn't the USDX know NOT to go canoeing where they play banjo music?

pods

Thu, 10/27/2011 - 16:01 | Link to Comment IQ 145
IQ 145's picture

Nice try, Tyler; but the simplest explanation is always best; and in this case, most accurate. Treasuries trade down when the Stocks rally. It goes like this; Risk  On, Treasuries Off. Disclosure; ahead $9,000 per contract, or %300 on my investment; on my short sale of the Long Bond on the CME on Oct.3thd. from 144-25; posted here on the day I put it on. You can participate if you wish, they have a long ways to go down.

Thu, 10/27/2011 - 16:05 | Link to Comment pods
pods's picture

Ummm, that is not disclosure, it is bragging by an insecure person.  Of course most already know that, IQ 145.

pods

Fri, 10/28/2011 - 04:49 | Link to Comment Grand Supercycle
Grand Supercycle's picture

DAX monthly chart at blog shows recent bullish candle revealing aggressive short covering rally enclosed within big picture bearish pattern.

Bullish USD weekly/monthly and bearish SP500/DOW monthly
charts will eventually ensure a violent reversal of equity uptrend.

http://stockmarket618.wordpress.com

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