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Primary Dealers Save Weak 5 Year Auction

Tyler Durden's picture




 

There was nothing pretty about today's 5 Year auction, which confirmed the trend of weak bond auctions started with yesterday's 2 Year issuance. Pricing at 0.752%, superficially it was only the second lowest yield ever for a 5 Year bond. However, with the When Issued trading at 0.734%, the tail was surprisingly wide for US paper which had not seen a such a big miss from market implied prices in many months. Add the Bid To Cover of 2.61, which was the lowest since June 2011, and things start to get really ugly. Finally observe the take down which saw Indirects account for only 35.1% or the least since February 2011, forcing Directs to load up with even more paper they don't want or need courtesy of the Twist extension through year end (meaning Dealers are stuck buying up all the Fed's unwanted paper in the short-end), forcing them to take down 54.1% of the auction, or the most since February 2011 also, and one can see why Rick Santelli gave the auction a barely passing grade of D. And with these two auctions, and tomorrow's 7 Year issuance, net US debt will be a solid $50 billion greater next week when all the bonds price, and rapidly on its was to $16 trillion, which should be breached in just under 6 weeks time.

 

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Wed, 06/27/2012 - 13:29 | 2565532 cougar_w
cougar_w's picture

Readers should insert "deer in the headlights" here.

Wed, 06/27/2012 - 13:32 | 2565547 battle axe
battle axe's picture

If Treasuries go, then it is "Planet of the Apes Time". 

Wed, 06/27/2012 - 13:34 | 2565554 SHEEPFUKKER
SHEEPFUKKER's picture

When, not if.  

Wed, 06/27/2012 - 14:26 | 2565780 NotApplicable
NotApplicable's picture

Only in Bizzaro World does one have a "nearly failed auction" with the 2nd lowest yield EVAH!

Nobody wants to buy this shit, but boy the ones that do are willing to pay dearly for the opportunity.

I wonder... what would Keynes do? :-P

Wed, 06/27/2012 - 13:30 | 2565537 fuu
fuu's picture

Couldn't have been too weak, stocks stayed ramped.

Wed, 06/27/2012 - 13:31 | 2565542 lolmao500
lolmao500's picture

The spending has slowed... no debt ceiling breach before the election... unless they attack Iran or pass a stimulus or something.

Wed, 06/27/2012 - 13:34 | 2565556 azzhatter
azzhatter's picture

the books have been adjusted, the spending continues

Wed, 06/27/2012 - 13:33 | 2565551 azzhatter
azzhatter's picture

clearly sustainable

Wed, 06/27/2012 - 13:37 | 2565566 LawsofPhysics
LawsofPhysics's picture

And the best part is that these banks are still taking my paper in exchange for gold and silver.  Suckers.

Wed, 06/27/2012 - 13:37 | 2565567 john_connor
john_connor's picture

never the less, The Ponzi lives another day

Wed, 06/27/2012 - 13:42 | 2565582 midgetrannyporn
midgetrannyporn's picture

Dealers are stuck buying up all the Fed's unwanted paper...

FUK 'EM

Wed, 06/27/2012 - 13:45 | 2565606 Winston Churchill
Winston Churchill's picture

Can we all party when it hits sweet $16 (tn) ?

 

The game is up.We are all just waiting for the music to stop.

Grab your Titanic deckchair now ,then bend over and kiss the

dollar goodbye.

Wed, 06/27/2012 - 14:02 | 2565671 SMC
SMC's picture

 

Nothing to panic about, nations and their monetary systems are convenient man-made constructs that have repeatedly failed throughout history. The only assets you can really count on are your mind, your abilities, your leadership and communication skills. Any productive physical assets that you own will remain productive depending on their supply chain required for operation. The value of other assets will continue to depend on supply and demand.

  One important question is which route the US will take to correct the imbalance - a downsized government focusing on the protection of individual liberty and property rights, or will it continue as a behemoth focused on supporting the "privileged few - private profits, socialized losses, no regulation, no responsibility" by the debt enforced serfdom, very little individual freedom, highly taxed and regulated many.

 

Wed, 06/27/2012 - 14:40 | 2565854 Village Smithy
Village Smithy's picture

When you stand back and look at the big picture you can't really believe that all of $16 trillion is going to get payed back. Default or inflation, choose the poison.

 

Wed, 06/27/2012 - 14:46 | 2565875 Hype Alert
Hype Alert's picture

Hitting the wall just in time for the nation's birthday.  Now where's that chart of reserve currency duration again?

Wed, 06/27/2012 - 14:52 | 2565899 RobotTrader
RobotTrader's picture

Bonds are still soaring, 35-year bull still intact.

 

AGG still pinned at lifetime highs. What's the big deal?

Sat, 06/30/2012 - 00:47 | 2575440 MeelionDollerBogus
MeelionDollerBogus's picture

soaring into default, you mean.

Buying bonds at this point is suicidally stupid

Wed, 06/27/2012 - 14:55 | 2565908 somethingisrotten
somethingisrotten's picture

SPAM

Wed, 06/27/2012 - 15:12 | 2565986 Mark123
Mark123's picture

This is still the same old primary dealers doing the Fed's work....PD balance sheets expand, and Feds stays the same.  Fed sells short dated Treasuries and buys long terms from PDs.  The circle of life.

 

Works until someone somewhere gets spooked.

Wed, 06/27/2012 - 18:23 | 2566632 PAWNMAN
PAWNMAN's picture

MY THEORY IS THAT WE'RE (THE U.S.) LIKE THE DEADBEAT JUST PRIOR TO FILING BANKRUPTCY. MAX OUT ALL THE CREDIT CARDS TO 20 TRILLION AND THEN TELL EVERYONE INCLUDING CHINA TO F-OFF! THERE'S NO WAY WE'RE EVER GOING TO BE ABLE TO PAY THIS BAD BOY OFF, NO MATTER HOW MUCH BIG BEN INFLATES.

 

Wed, 06/27/2012 - 20:08 | 2566894 Venerability
Venerability's picture

I thought Silver would SOARRRRRRRRRRRRR on those Auction results.

But of course, what we see in the US in entirely Paper Silver. That's why the move of PM trading to China from London and NY is going to be so important.

In any case, this Auction was, among other things, a vote of No Confidence in the JPM Nexus. Let's hope it's the first of several "Grade D By Santelli" results.

Silver has at long last bottomed, IMO, as have the PM stocks and the PM indices. If there is any more backing and filling, take advantage, outtrade the Ninnies, and prepare for a better than usual Late Summer Rally in the PM sector.

 

 

Wed, 06/27/2012 - 21:06 | 2567026 poor fella
poor fella's picture

FAIL! FAIL! FAIL! FAIL! Just FAIL!

Oh well, one's a coming and I can't wait to see the looks on the faces of CNBC hosts! Going to keep an eye out for soiled pants too.

Bastages!

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