A Month Later: 10 Year "WTF Auction" Snapback Is Fast And Furious

Tyler Durden's picture


A month ago, the US issued $21 billion in 10 Year paper in what could only be dubbed as a "WTF Auction" - one in which every record was broken as demand for paper could seemingly not be satisfied. At 1 PM on July 11 the paper priced at 1.459%, a record-shattering 6 bps inside of the When Issued. What a difference a month makes. Not a month later and the just completed issuance of $24 billion in 10 Year paper could be classified as a collapse in demand, as the auction priced at 1.68% or a whopping 2.5 bps tail. Just as notably, after hitting an all time of 3.61 high last month, the Bid to Cover imploded to 2.49: the lowest broad demand indication since August of 2009. The internals were just as loopy: Direct take down imploded from a record 45.4% of total to just 5.2%, the lowest since November 2009, and with Indirects refusing to budge, the Primary Dealers were forced to take down 54.2%, or the most since October of 2011. And while the lack of interest was not surprising, especially in the aftermath of the just released Elliott Management letter (more on the later), the violent swings in demand for US paper at issue are starting to make quite a few desk traders very concerned. Because all it will take to crush the credibility of the bond market next is a few more such wild swings, and Geithner and Bernanke better hope that Knight can somehow be a DMM in TSY paper as well.

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Wed, 08/08/2012 - 13:18 | 2688159 magpie
magpie's picture

You didn't bid that, Draghi made it happen.

Wed, 08/08/2012 - 13:29 | 2688203 john39
john39's picture

start the war in 3, 2, 1,.....

Wed, 08/08/2012 - 13:34 | 2688235 magpie
magpie's picture

Against the Eurozone ?

Wed, 08/08/2012 - 13:37 | 2688242 Neethgie
Neethgie's picture

Maybe thats the new normal, people starting wars on the eurozone, instead of europe fighting itself as it has done for centuries.

Wed, 08/08/2012 - 13:53 | 2688303 magpie
magpie's picture

There is nothing to steal.

Wed, 08/08/2012 - 14:08 | 2688358 vast-dom
vast-dom's picture

only perception and real goods left to steal, but both dwindling fast...

Wed, 08/08/2012 - 16:02 | 2688771 smiler03
smiler03's picture

I think they're all saving up for the Manchester United IPO. 

edit: or negative yield European Sovereigns.

Wed, 08/08/2012 - 13:39 | 2688254 john39
john39's picture

does it matter who?  they will concoct the basis anyway...

Wed, 08/08/2012 - 13:18 | 2688162 HedgeAccordingly
HedgeAccordingly's picture

lack of interest in da bonds - 


Wed, 08/08/2012 - 13:19 | 2688167 CClarity
CClarity's picture

Big tail, less than 2.5% btc, and primary dealers choked down a lot at levels they just threw in but didn't expect to have to own . . . predict Fed will help them out with long term "ahem" comments so they instantly profit later this week before they actually have to pay for delivery next week.  More of the same.

Wed, 08/08/2012 - 13:57 | 2688319 eclectic syncretist
eclectic syncretist's picture

China must have bought more gold instead.

Wed, 08/08/2012 - 13:21 | 2688175 Xibalba
Xibalba's picture


Wed, 08/08/2012 - 13:37 | 2688246 Lost Wages
Lost Wages's picture

Please expand on your theory.

Wed, 08/08/2012 - 13:23 | 2688177 buzzsaw99
buzzsaw99's picture

if, in 2007, someone had said tlt would be trading ~ 125 they would have been ridiculed.

Wed, 08/08/2012 - 13:25 | 2688188 Let The Wurlitz...
Let The Wurlitzer Play's picture

WARNING THIS IS NOT BULLISH.  No longer faith in 10yr.  I cant wait to see some dimwit algo programed to buy ES when treasuries drop in value go bust.  We will here about that in a month or two.


Wed, 08/08/2012 - 13:33 | 2688226 drivenZ
drivenZ's picture

10yr yields were over 2% like 3 months ago. A 10bp jump to 1.68% means next to nothing. 

Wed, 08/08/2012 - 13:59 | 2688325 CrashisOptimistic
CrashisOptimistic's picture

Pretty much.

As long as oil is scarce, deflation is relentless.  The engine can't hold RPMs as the fuel line is pinched.

Wed, 08/08/2012 - 14:09 | 2688363 LawsofPhysics
LawsofPhysics's picture

Welcome to another time in history where man stands at the edge of his own technological capabilities.  Interesting times indeed.

Wed, 08/08/2012 - 18:41 | 2689267 dannyboy
dannyboy's picture

Zerohedge is talking about the Bid-to-Cover ratio, not the bond price itself. Rather the demand of the bonds of buyers. Sort of like looking how many people in a store, rather than the prices the store is charging. And, as they point out quite cleary if one reads the article is quite significant, and with FRN's coming which has confused even the mighty intellect of felix salmon could preclude a collapse in the US bond market. And that is THE black swan.

Wed, 08/08/2012 - 13:27 | 2688197 Joshua_D
Joshua_D's picture

Don't worry. Someone just loaded the wrong algo.

Wed, 08/08/2012 - 13:34 | 2688199 LawsofPhysics
LawsofPhysics's picture

Ha... Ha...

Predicted by many here.  Thanks ZH.  In the absence of any rule of law or change in fiscal policy the only safe bet I see is for continuing and greater oscillations.  Well, that or war of course.

Wed, 08/08/2012 - 13:29 | 2688209 Lost Wages
Lost Wages's picture

Is it time to go long on TBT yet?

Wed, 08/08/2012 - 13:33 | 2688225 Cognitive Dissonance
Cognitive Dissonance's picture

TBT Bitches

Wed, 08/08/2012 - 13:36 | 2688239 magpie
magpie's picture


Wed, 08/08/2012 - 13:38 | 2688247 Commander Cody
Commander Cody's picture

Nonetheless, extremely bullish and suggests we BTFD, any FD.

Wed, 08/08/2012 - 13:42 | 2688262 Dareconomics
Dareconomics's picture

Everyone is on vacation, and all of the markets are thinner than usual. Hence, things like this happen and will continue to happen until Labor Day.

If we have a few auctions like this in a row and we're in October, then we will all have something to write about.  In the meantime, I'm going to grab some lunch. 



Wed, 08/08/2012 - 13:58 | 2688322 Winston Churchill
Winston Churchill's picture

I'm more interested in the Fed's figures tomorrow on direct repo intervention.

If it comes in over $2bn ,we have a real problem Houston.

Then again,we know the CB's lie whenever required,so if its less ,maybe its  a fake.

So much for NIRP.Looks like they will not even be able to hold the line on ZIRP.

Wed, 08/08/2012 - 14:03 | 2688338 CrashisOptimistic
CrashisOptimistic's picture

Not a bad comment because it has merit and the fiscal cliff isn't really on radar screens yet, but you will get no upticks from me as long as you are a filthy pimp of your own website on someone else's traffic.

Wed, 08/08/2012 - 13:51 | 2688295 Dr. Engali
Dr. Engali's picture

So who ever bought last month is under water. It's a darn good thing they will be clipping that 1.49% coupon for the next ten years.

Wed, 08/08/2012 - 13:52 | 2688298 disabledvet
disabledvet's picture

Rumor is that the Fed has already built a massive spiral staircase replete with scantily clad vixens and men with flaming arrows for their confab in Jackson's Hole. The plan is for the entire FOMC to show up in toga's while "Dramatis Personae" Chairman ascends to the accolades of his "revolutionary minions." I know I can't wait!

Wed, 08/08/2012 - 14:06 | 2688351 Commander Cody
Commander Cody's picture

Aaah, I yearn for the good old days of fancy fun with Busby Berkeley and Ester Williams.

Wed, 08/08/2012 - 14:10 | 2688367 q99x2
q99x2's picture

Invade the Hamptons.

Wed, 08/08/2012 - 14:11 | 2688370 govttrader
govttrader's picture

I would argue the low volume levels in the market (both bonds and stocks), were responsible for todays weak 10yr auction, as many market participants are on vacation (it is august afterall).  Its way too early to call this anything more than a minor hiccup.  1 hour after the auction the treasury market is already trading calmly above the auction stop.  Also, last months WTF auction was an anomoly.  Most likely some market participant got caught very short and decided to cover the entire position in the auction (usually not the smartest trading decision, but hey, that guy probably doesn't get paid a % of his P&L).


What will be interesting is tomorrows UST 30yr bond auction.  Will todays 10yr tail entice more market participants to bid for a tail tomorrow (thus ensuring that it doesn't happen)?  Or will the low volume summer doldrums still be just as dull, causing another poor showing?  Volume levels traded in the market should be the key to figuring that out pre-auction.

Wed, 08/08/2012 - 14:13 | 2688378 TooBearish
TooBearish's picture

Going to be a MASSIVE rally

Wed, 08/08/2012 - 14:32 | 2688444 slewie the pi-rat
slewie the pi-rat's picture

wtf is right, BiCheZ!

if the interest rate had gone down any further, it woulda been "worse" imo

so this is doom on a freaking shingle? risk0n and a temporarily shit-canned USD coming offa this near-2-year high  since late last week?

are the fuking checks in mail or not?  sheeesh!

Wed, 08/08/2012 - 21:13 | 2689601 tony bonn
tony bonn's picture

there was no ebb or tide in demand.....the demand cycle is strictly what db and ms are hatching in ir swaps...interest rates have to be suppressed with the massive issuance of crapulent debt...but one day the big double wide fat elephant is going to catch on fire and it will be an ugly mess to say nothing of a stink....jpm is caught up in all of this of course with its brilliant whale trades....

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