"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"