This page has been archived and commenting is disabled.
Primary Dealer Take Down Hits 2012 High In 2 Year $35 Billion Treasury Auction
With Operation Twist being extended for another 6 months, forcing Primary Dealers to buy up all the short-end bonds from the Fed, the last thing the Dealer community needed at today's 2 Year bond auction was to be stuck holding the bag. Which is precisely what happened: the Treasury sold $35 billion in fresh 2 year paper as the first auction of this week's trio of bond issuance, at a yield of 0.313%, the highest since March even if in line with the When Issued, and a Bid To Cover of 3.62, the lowest since February. But the key internal indicator was the distribution between the Primary Dealer take down and everyone else: at 60.4% of the entire offering or $21 billion, going to Dealers, this was the highest notional having to be stuffed in the channels of the Primary Dealer repo market since December 2011. Naturally, the offset, Direct and Indirect takedown, was quite low, with Indirect bidders holding just 31.69% of the auction, or the lowest since December as well. Unless the PDs can offload the bonds quickly and effectively, this means they are stuck with another product for $21 billion which will generate returns far lower than ROI and ROE breakevens, and force them to take even more risks with whatever other capital they have lying around courtesy of US depositors.
»
- 4302 reads
- Printer-friendly version
- Send to friend
- advertisements -
So how many days does this buy us before we hit the debt ceiling again?
I thought the Fed had only 2 months of short term Tresury supply (if I remember some earlier ZH reports). How is the Fed then saying that they will extend Twist by 6 more months ? Any clues folks ?
If ZH reports were correct and Fed exhausts the ST stock by end of July then what will the Fed sell to buy LT Treasuries ?
I am lost on this.
You actually thought that they planned that far ahead?
Other than 'magic' I am also completely at a loss. Perhaps Jesus is going to come back to work at the Fed with that 'bread and fishes' thing?
He is busy in Europe right now ,trying to raise the dead.
The bond market: 31% suckers.
hey, it's got a yield greater then zero and qualifies as collateral for all the additional increases being generated by the downgrades.
No mas.
As the system dies, the need for zero yielding high quality (all's relative in love and finance) paper skyrockets.
Yeah, but knuck... I offered them my sisters Leif Garrett poster collection as collateral and they didn't accept it... What gives? Maybe I ought to try again in a few months...
Simple. When they run out of actual short-term treasuries, they'll start selling promises of future short-term treasuries. Scared money will flock in droves to the new treasury treasury market.
Got a link to the article in question? I could only find this one: http://www.zerohedge.com/forum/2012-06-20/extension-operation-twist-suggests-no-qe-until-after-election
I smell smoke, oh ohhhh....
It doesn't look like China is interested in any of our two year paper. They must have interest in the ten year only. Probably taking the primary dealer role of buying from treasury and flipping it to the fed.
That's an interesting point. Does China's new direct purchase relationship make it more difficult to see what and where the Fed purchases for its balance sheet?
China is interested in two year paper = China isn't interested.....
Damn cheap Dell keyboard.
So I'm thinking that between:
- EOQ window dressing
- Wimbledon fortnight
- Euro 2012 conclusion
- 4th of July BBQ's
- Tour de France
- Olympics
- pre-Jackson Hole murmurrings
- RNC/DNC convention clownshows
& whatever else they can think of, all they need to do is come up with a handful of big rally days to keep the sheep from stampeding out of the barn until September...
I disagree. I'm thinking that the PD's engineer a crash right now to offload some of their short term Trashury positions onto scared institutions. They can't afford for short term rates to increase at this point.
Convention Clownshows?
I thought these were important gatherings that will help us pick our next President!
I think they are going to be covered by the media too!
The drinks will flow & blood will spill...
~~~
http://www.youtube.com/watch?v=1FmPhJkdTwU
When will we reach the point where the Fed rates Tsys on a mark-to-model basis, just like the ECB with Spanish debt, because they are downgraded and repudiated?
I'm surprised that there are not more people who understand this.
The fact that the Fed owns more and more of the long-dated Treasury market and the rest of the yield curve is flat-as-a-pancake means that the Banks' carry trade profits are slowly but surely evaporating.
The longer ZIRP stays in effect, the less and less of a benefit it provides to the big Banks and Primary Dealers. Eventually it will eat up all of their carry trade profits. I suppose at that point (and not a moment before), the Fed will end it.
And just where would the bonus pool come from then my friend?
War in an oil rich part of the world would give cover to a hyperinflationary 'printing' regime that would quickly eviscerate the real value of the debt hangover, boost all non-paper assets and thus keep the banking system alive.
Only 'Ctrl P' can save the day now.
The banksters were given the choice; have your number 1, no brainer, so easy a child could do it source of profit (carry trade) taken away, or we are forced to let the tide go out and see just how many of you are swimming naked. None of them are very well endowed (being a bankster is really a compensating for something kind of gig) so nakedness was not an option. They thought they could just make up for the lost profit by leveraging up their free ZIRP money. But we all know how that's turning out especially for JPM.
If you want to see something scary, check out these numbers.
http://www.treasury.gov/resource-center/data-chart-center/quarterly-refunding/Documents/TBAC%20Discussion%20Charts%20May%202012.pdf
Slide 14 shows how even if we recover to a "primary" surplus within the decade, the interest payments on the debt will suck it up.
Slide 34 shows how primary dealers have had to make up for the loss in appetite for US debt among the other classes.
Which brings up the only questions that really matter; why is treasury paying a private bank to coin it's own money and where is all that interest going? Audit and End the Fed already.
you have to wonder at what point these auctions hit a wall
If all depositors in Europe and the US would go and collect their cash simultaniously at the same time the system would be dead, given that it is already insolvent. It is so easy for the 99 to show their strength they don't have the balls to do it, but if they did understand the power they still have it would be game over for TPTB in no time. Ron Paul supporters, Nigel farrage lovers unite collect your cash and destroy this fake capitalist system in a heartbeat. Bye bye TPTB. This is real power. We still hold it and if we execute it you are done. So is everything build in 50 ought years. A little pain willl have to be taken by the 99 as well you don't pull off a stunt like this without casualties, but in the end children recently born or not even born will have a future again thinking about things that matter instead of us adults entertaining ourselves with this ridiculous circus. We don't have the balls do we???
5% is enough 1st of September collectively we can pull the rug. End period game over. Bye bye we realy can do it. God what a power us simpletons still have ;-) I know it is wishful thinking it won't happen, because we rather hold on to the scraps thrown our way then to seize back power. Go on kick the can down the road and nag about it for as long as you can (12 years at least still to come). Looking at my son for whom I would happily give up my right arm I'm thinking fuck it. If I can get everybody to pull of this stunt with me he might have a chance.
Happy trading.
The list of primary dealers:
Bank of Nova Scotia, New York Agency; BMO Capital Markets Corp.; BNP Paribas Securities Corp.; Barclays Capital Inc.; Cantor Fitzgerald & Co.; Citigroup Global Markets Inc.; Credit Suisse Securities (USA) LLC, Daiwa Capital Markets America Inc.; Deutsche Bank Securities Inc. Goldman, Sachs & Co.; HSBC Securities (USA) Inc.; Jefferies & Company, Inc.; Merrill Lynch, Pierce, Fenner & Smith Incorporated.; Mizuho Securities USA Inc.; Morgan Stanley & Co. LLC.; Nomura Securities International, Inc.; RBC Capital Markets, LLC; RBS Securities Inc.; SG Americas Securities, LLC; UBS Securities LLC.
It hardly seems to be a list of those who are forced to do anything. Unless you mean forced to accept bail-out money.
BNP Paribas : kaput
Citigroup : kaput.
Deutsche Bank : kaput
Merrill Lynch : kaput.
Morgan Stanley : kaput.
RBS : kaput.
UBS : kaput.
Most of these banks are kaput on paper but still are up because of mark-to-fantasy accounting.
My point exactly. The only thing supporting the too big to fail banks are the too stupid to notice taxpayers. But enough money can be spent on elections and marketing to make it all seem normalized. The population will keep fruitlessly chasing the dream while paying to keep the banksters in dreamland.
i seem to recall in the past where articles were run here following any auction on how fast the PD's flipped the just bought inventory right back to the UST ...48-72 hours or less.....is that prohibited now
Could primary dealers say NO MORE WE AIN'T PLAYING THIS GAME ANYMORE??
They could but so far this is a small price for them to pay in order to keep the global Ponzi alive.