"Horrible" 30 Year Bond Auction Prices With Unprecedented 11 bps Tail

Tyler Durden's picture

The just completed auction of $16 billion in 30 Year bonds, was, as Rick Santelli said, "a failure". And while this may be a little dramatic, this was without doubt one of the ugliest 30 Year auctions ever seen. The 30 year priced at 3.75%, a huge 11 bps tail to the When Issued which was trading at 3.64%, the Bid To Cover plunging from 2.80 to 2.05, the lowest since February 2009, and, most shockingly, the Indirect Bidders Imploded to a paltry 12.2%! Those wondering if Chinese posturing would led to anything more than just jawboning have their answer. The Indirect tendered bids were just $3 billion or about 20% of the total auction size, which resulted in a $2 billion take down. It was so bad that the Directs were for the first time in 30 Year history greater than the Indirects. And yes, while the yield was close to record low it won't stay there especially if as is now expected, August 26 will see the BEA report a second GDP revision of ~0.6% at 8:30 am, which will be promptly followed by Bernanke's 2011 Jackson Hole address. And so the yoyo continues: what today's auction has proven is that going forward the Fed will be forced to crash the market every day that there is a Treasury auction, while ramping stocks on days when Treasury does not need to fund its borrowing binge.

And what happened to the UST curve post the auction:

And a quick recap from Bloomberg: "Horrible auction,” RBS strategist Bill O’Donnell writes in client note. Dealers take 68.3%, “largest share of the auction since the unhinged markets of Nov, 2008. It may be a while before the markets get 30yrs priced on the curve appropriate to the Fed’s actions earlier this week"

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Cleanclog's picture

Dealers could get screwed with that much take down.  Back to gold?

Spitzer's picture

 back to DOW it looks like. Its up 350.

The "anything but gold" trade is going full swing

TruthInSunshine's picture

Recent history says it breaks post 2:30 pm.

I am going with  'massive volatility returns in 60 minutes or less' Alex, for $2000.

Cleanclog's picture

So far some strong hands with the dealers who "took" the 30 year, even if by surprise!

jaffa's picture

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jaffa's picture

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SparkySC's picture

Wasn't it here on ZH that they said the next major downturn will begin w/ a failed auction?

Well here it is!


"Where's the KaBoom? There was supposed to be an Earth shattering KaBoom!"

Joe Sixpack's picture

Give it half an hour or so for the news to get out. Sheesh.

jaffa's picture

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jaffa's picture

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pan's picture

Tipping point?

Greater Fool's picture

Holy 10-30 steepeners, Batman!

Turd Ferguson's picture

"what today's auction has proven is that going forward the Fed will be forced to crash the market every day that there is a Treasury auction, while ramping stocks on days when Treasury does not need to fund its borrowing binge." 

No truer words have been typed.

Chief KnocAHoma's picture

You mean the Fed would crash markets just to direct money into one assett class like some grand master in an Orwellian World. Immposible! We live in a free society and believe in free markets!

Damn it... I almost said that without laughing.

I am The Chief

PS - buy land - http://sotcksdairyroadfarm.blogspot.com/

takinthehighway's picture

If you're in the market for a retreat, may I suggest...

pods's picture

Absolutely.  The FED will do this until the swings become too great that people leave the markets (the ones left) for good.  
Then QE3 will be cemented.  Just too much debt has to be sold at too low of rates.  That has to come from somewhere.


SheepDog-One's picture

'Failed bond auctions'...well thats got to be bullish! Maybe bullshit is what I meant.

DosZap's picture

 SheepDog-One @13:20

Failed Bond Auctions, good for drop in Gold..................................BULLISH!!!!!!!!!.

$75.00 drop from High,in 24hrs,not done yet, yeah, that's a Parabola.

Larry Darrell's picture

So is the top in in bonds (yields at lowest they will get)??

Because I'm meeting about loan refinancing in an hour and a half.  it would be nice to lock it at just the right time.

FLIP THAT BOND's picture

If you abide by the theory that QE3 will be announce on Aug 26 at Jackson Hole, then the sell off in stocks will probably continue until then and therefore force yields lower.  My guess on the best time to refi will be Aug. 25, right before QE3.

gkm's picture

John Najarian is only good for one thing IMO and that is this lesson:  "Don't be penny wise and dollar foolish".

nodhannum's picture

Larry, I just got confirmation that I locked in with my bank at 3.375% for a 15 ur fixed with no origination and no points..,Youssa!!! I close next week. What idiot loans money like that :-))

pods's picture

Ones who need a housing market to keep the ponzi going.

Disclosure:  Still sitting in a 30 year ARM.  Now at 2.5%.  Figure if you are going to play chicken, better to be on the side of Uncle Gorilla, as they need low rates too.


NotApplicable's picture

So you're the one keeping the ARM market going.

I just talked to a coworker who refi'd yesterday (20yr @ 4.25). Meanwhile, i just called my guy to refi my VA loan (30yr @ 4.0)

pods's picture

I took it out in like 2005 I think, at 3.5%.  It has moved up and down a bit, adjusts yearly, 1 point max per year, 7.5% up limit, no down limit.  It is impaired, as WF just registered it earlier this year.  They wanted to refi me. I said no thanks, then they registered it with the registrar of deeds.  


Manthong's picture

ARMs are great if you've got the cash to pay off the loan when the SHTF.

pods's picture

It has a max rate of 7.5%, so it cannot break me from interest rate alone.  Only can go up 1 point per year as well, so it would be 5+ years before I hit the top rate again.  If (when) TSHTF, I got a bug out spot and could really just up an leave with the door locked and the power off. Pretty stable area, but always have backup.


Mactheknife's picture

Backed the truck up yesterday on TBT...no-brainer :-)

max2205's picture

massacred the TLT boys....Fewd reset to pump stocks...will it work...this was all preplanned no doubt

AlaricBalth's picture

Looks like China has had enough of our fiscal mess. “The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone” and “China, the largest creditor of the world’s sole superpower, has every right now to demand the United States to address its structural debt problems and ensure the safety of China’s dollar assets,” China’s state-run Xinhua News Agency said Saturday Aug 6, 2011.

RobD's picture

Umm...WTF? LOL, how long have you had that one ready to go hh?

slaughterer's picture

Is that the "smiling O" picture Tyler likes to use when O gives a telepromper tennis eyes performance?  I think it is.

monopoly's picture

And so it begins. TBT up 9%. Fasten those seat belts, and trays locked in an upright position please.

nobita's picture

I get the feeling that this is not a run on treasuries or a run on stocks or the dollar. This is a run on America.

snowball777's picture

Hey, who tied these shoelaces together?!

Steroid's picture

This explains why the DOW is up!

vote_libertarian_party's picture

Nobody thinks beyond a 2 minute horizon.

If the Fed isn't buying with their vapor money the gvt needs to find $120B in new buyers every MONTH.

10yr should be at 20% not 2%.

SRV - ES339's picture

what today's auction has proven is that going forward the Fed will be forced to crash the market every day that there is a Treasury auction

... along with PMs (which has been going on for months).

FunkyOldGeezer's picture

what today's auction has proven is that going forward the Fed will be forced to crash the market every day that there is a Treasury auction, while ramping stocks on days when Treasury does not need to fund its borrowing binge.


If you had the actual data to prove this, the game would truly be over. Everyone would pile into the same bet depending on which day it was in their auction cycle.

fuu's picture

"If you had the actual data to prove this, the game would truly be over."

Some days I miss the junk button.