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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LawsofPhysics's picture

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

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.


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

dwdollar's picture

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

There, fixed it for you!

iDealMeat's picture

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

slaughterer's picture

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

Eally Ucked's picture

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

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.


SeverinSlade's picture

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

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.

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

blunderdog's picture

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

Trad3er_1337's picture

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

Randall Cabot's picture

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

afdestruction's picture

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

Tsar Pointless's picture

Tick tick BOOM!

Coming to a United States of America near you!

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.

slaughterer's picture

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

LawsofPhysics's picture

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

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.

LawsofPhysics's picture

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

earleflorida's picture


let's look at the three options shall we:

Social Security

Health Care/ Medicare/ Descretionary


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** 

optimator's picture

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

Reichsmarshall Herman Goering

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.

jdelano's picture

unemployment back to normal at 5%

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

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.

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.

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? 

faustian bargain's picture

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

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.

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.

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.

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.

Mr_Wonderful's picture

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

LawsofPhysics's picture

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

Mr_Wonderful's picture

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

LawsofPhysics's picture

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

spartan117's picture

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

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>


pods's picture

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


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.

pods's picture

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


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.