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Rate Plunges, Bid To Cover And Foreign Bid Soars In Just Completed 10 Year Auction
If there was any concern that today's auction of 10 year bonds may have trouble finding buyers, the just released results should sweep any fears deep under the rug: the $24 billion 10 year auction priced at 2.02%, the second lowest ever, higher only compared to the 2.00% from September 2011, while the Bid To Cover soared from 2.64 to 3.53, the second highest ever only to the 3.72 from April 2010, and lastly, the Indirect Bid jumped from 41.6% to 61.9% of the total takedown, amounting to $12 billion of the total ex Soma, which is the second highest ever only to the record 71.3% from February 2011. Further, coming 2 bps to the 2.045% When Issued, shows that there was nothing about this bond not to like. In other words, the market continues to drift off in some QE3 hopium-inpsired parallel reality (which will promptly crash if and when Bernanke says nothing in exactly one hour), even as credit continues to flood into the relative safety of US paper (earlier we saw 4 week Bills price at 0.000% - some "risk taking"). One wonders where and why the surge in foreign demand for safety came from. We will likely very soon know.
And this is what is called market cognitive dissonance shock:
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Capital prez baby - that's the story.
And Greek deposit outflows, Euro plummet, and gold leasing woes.
US RULES - USD, US T, US MILITARY, US CORPORATIONS - every one in the world loves us and wants what we have.
Freedom, Bitchez! USA, USA, USA.
Merry Christmas - and CHEERS in good ol' Anglo Ale.
I think its' more a case of the institutions that buy US paper, or any other paper for that matter would rather put their clients assets at risk in US bonds, or anyone else's than run to real safety, cos no one can possibly see this coming can they?
That way, when they lose it in default it can't possibly be their fault can it?
Suckers.
Exactly, for on the talk on ZH that the entire world will dump US bills and bonds, being the world's reserve currency makes this very unlikely and the demand for dollars will always increase in times of crisis, even if the US is the source of the crisis.
This was the real intention & gain for the US when everyone accepted US dollars as the global reserver currency some 60 years ago....
Give it time. Until then?
ZIRP4EVA
'the demand for dollars will always increase in times of crisis...'
Now didn't this happen with German bonds right around 1920 ish?
or is my history a little woolly...
because 60 years is such a long timeline, it must represent the trend to eternity.....
Good enough to ramp full retard equities apparently.
today's correlation makes no sense
Used to be until this morning Euro down, dollar up=equities down, now theres apparently no longer any correlation of anything at all, everything unhinged.
But theres murmuring of Bernank and a big red bag full of free gifts! Yea that will flop.
pwg came in big today for bernanke"s announcment
Capital transfer from EZ bonds to US bonds. Less of two evils. If it is a QE3 spec flip, then these indirects will get burned, as usual.
Indirects walking a plank I wouldn't go out on!
Best deal world-market wide is park your money at 0% 'guaranteed' return? Actually a guaranteed steep loss, as 2% will never cover inflation over 10 years. Just full double retard.
Ok, so when the bid to cover is up does that mean there are a lot of SELLERS of treasuries or a lot of BUYERS?
Lots of willing buyers.
$21 Billion in 10 year bonds offered. If only $21 B had been bid it would be a 1.0 btc (bid to cover). if $42B, then a 2.0 btc. 3.53 btc means there were bids of more than $73 billion. But that does not mean all those bids were for the same price. The primary dealers put in multiple bids each - part of their responsibility "market making". I was a Treasury bond trader for a primary dealer in the past. Depending on whether I was covering shorts, wanting to go long, etc . . . I would put in a stong bid for that amount, then fade some bids so I looked willing to take down plenty. In sloppy auctions - those with long tails - I would end up with more than I wanted. For example, in this auction that came at 2.02 yield and had been trading 2.04 at the time bids went in . . . I would likely have had a bid for what I needed at 2.00 (as it had traded that strongly yesterday) to make sure I got what I "needed". I might have bid for more that I would have flipped at 2.03 (and would have been a bit surprised to not get that), bid for some more at 2.05 that I would have been okay with, also probably for a flip, and then bigger bids at 2.08 and 2.10. That's fairly normal. And every primary dealer would do similar. Sometimes a primary dealer has inside info on a foreign central bank, World Bank, or a large fund that bids through them and they may want to take the maximum allowed and "run" the issue. About 1/3. Sometimes involves a repo game. Lending the security to those that are short. More likely in previous issue since the actioned issues don't settle right away. Mini primer
Meant to add that 2.02 is where the $24 Billion was filled - many were bought more expensively. 2.0 and 2.01 2.015, etc. And usually, only a percentage of what primanry dealer bid at 2.02 would be awarded. In the case of this auction, if I had bid $200 million at 2.02, 67.48% was awarded to competitive bids of 2.02, so I would have purchased $134.96 million at that price, not the $200 million I bid for. Primary dealers bid for more than $46 Billion in this auctions, but were awarded only $6.2 Billion, so the vast majority of their bids were back at higher yields. That the yield moved to 1.98 after the auction suggests some of those primary dealers did not get the minimum they "needed/wanted" and had to "chase" the security to get back within their "limits" perhaps, or at least to the position they want.
Buyers.
Buyers who say the best deal around is park your money for a guaranteed, but known, loss.
Volatiliteeee Everywhere
Indirect Bidders=Printing presses
No QE3 coming, because over the last year theyve already been doing QE3 like mad, probably $4 trillion worth pumped into bond buying and markets just to keep it all from full collapse.
Yet hopefulls sit and expect Bernank in an hour to announce more free money gifts from his Santa bag for happy market rally...big let-down coming.
It didn't stop the Central Banks from beating the shit out of Gold and subsequently silver. Someone is scared again, so the CB's lent gold is being lent again and sold forward so the bullshit continues in front of the regulators as usual.
I was specifically commenting on the "Indirect" bidders in today's auction, not giving any hint of what I expect to come from Chairman Ben.
All I meant was that the "Indirect" bidders came courtesy of the ghosts of printing presses past.
I agree that Qe3 is already a fait de compli. I am puzzled a bit by this breakout in the dollar -- if anything it will require The Bernank to print Euros([cough] USDs) on behalf of the ECB since they are all seized up over the pond. Euro situation must be even worse than all us doomers here are reporting.
Strangle the FOMC announcement.
Everyone's on the same side of the trade now as the appetite for USDs and USTs continues to grow. Definitely a flight from what's left of the Euro but give the European leaders some credit in that they are getting the Euro to devalue, helping their export based economies and hoping (albeit very quitely) to start to drive inflation to paper over mounds of worthless debt. At this point one thing should be very clear to all of these leaders. Publicly, all is well and a solution is still present to solve the debt woes. Privatel, all is dead as there is no way to repay the debt so its time to pick your poison.
You either have two choices at this point with the huge debt load that cannot be repaid. First is an out right default and a crash in the entire system (take your medicine all at once). Second is to inflate away the debt (take your medicine for years and years in hopes you recover). So let's make the aging race horse known as Uncle Scam look good for a couple of more races and get everyone to bet that the hold horse has a little more juice left. Just like the smartest bettors at the track in that they will always provide some free insight on the so called favorites but the real money has been placed somewhere else.
It should be quite a scene when everyone finds themselves on the same side of the trade and it begins to unwind.
We may see a two handle on the long bond in a couple of years. Wouldnt dat be sumptin.
TLT is on fire. Equity collapse is imminent
I know the gold guys hate this, but look, it's just the way it is. There is no fuel for the engine. The economy is going to contract and that is deflationary. If you don't have fuel for the engine, it cannot run, and the fuel is oil, not liquidity.
Deflation is the order of the day. The 10 year is under 2%!!! Look at it. It's under 2%! This is supposed to be a recovery and it's under 2%. You will NEVER see that when inflation is supposed to be taking off.
There is no answer to this. There is not enough oil. It is going to crush civilization and there is not anything anyone can do about it.
what does your rant have to do with gold? and besides, CBs are buyinh the notes with fiat paper. they are using something that has zero value to buy something with zero value. and they are lying idiots. crash and the worthless paper system, the Fiat Ponzi, is gone. where will gold be then-
priiceless
egggggggg-actly!!!! gold stands no chance. asphyxiation by deflation is coming. and to think qe3 is around the corner is laughable.........
why wont ben print for the foreseeable future:
election year and every repub has a sudden change of heart, ron paul type view of the fed
oil would be at 200, which would crush any hallucination of a recovery
the whole world, yes, entire world, is buying our bonds, so ben has no need to support the country's debt addiction
rates are at near zero forever going forward and its done nothing to spark investment
stock market in all its delusional glory is doing fine on its own
qe3 doesnt work, and despite those that think ben is mindless printing machine, he knows it wont help
good luck with your gold, i personally used some of it for my teeth...................
gold dominates deflation. good luck with whatever you are invested in
Crashis, could you explain how you put the issues of 2% yields and peak oil together? And then also throw in the price of gold? I don't follow your reasoning.
The guaranteed loss on bonds is starting to become significant. Can people really find nothing else to do with their money?
We will never get an announcement of QE3, but that doesn't mean we won't get QE3.
Eventually even those investors and banks that have squirreled away money in the bonds of a bankrupt economy (I am referring to the US and not the EZ) will seek to put their money elsewhere. Can anyone imagine a scenario where this exit will be orderly. Keep in mind that it will also have to come at a point when the US budget balance can withstand higher rates. So it needs to be at least a decade away. Hmm, any chance investors will be willing to lose 1% to 2% compounded annually for at least a decade?
Look, these are valid points but for the obvious rebuttal.
There's nowhere else to go.
The slightest hint that Europe might not be disintegrating, on Friday, drove Treasuries down 2 points. Yes, that did happen, but it didn't happen because people wanted more yield. It happened because Europe buyers felt for 12 hrs that maybe they didn't have to flee.
It was nothing more than that. For a brief time, they felt they didn't have to flee.
People are in US paper because they are persuaded that as civilization disintegrates, the US will be last to renege. No one "believes" in Treasuries. They are just there because there is no alternative. That won't change until there is somewhere else to go.
PDs flip the bonds back to the Fed within the day and you think there is demand
I for one believe there is somewhere else to go. I don't think I am bullet-proofed, but I have done what I can. I own precios metals, but also agriculture, mining (precious and base metals), and energy equities. While nationalization is always possible, a diversified mix of companies that will continue to be required to support human life is the best hedge -- particularly for those able to identify best in class.
Now, given the amount of liquidity out there, this option may not be available to all. Maybe the end result is that the really big and dumb money wipes itself out while smaller pools of (what I like to think to be) smart money will prosper.
This is why their end game is always world war...when youre just trying to stay alive till the end of the day, no one really gives a shit about a bond rate or a stock index....books wiped clean.
FWIW, BTW, IMHO, Chairman Ben better shower the Ponzi peons out there with massive Skittles and Reese's Pieces this afternoon, else the equity markets will plunge.
It's "punt or grunt" time for the much-vaunted and highly-anticipated Santa Claus Rally.
Either way, we'll know in about a half an hour, won't we, bitchez?
Chairman Ben does not celebrate Christmas.
Neither do I. Much for the same reason.
Happy Hanukkah, bitchez!
No one will ever believe in a QE3 rumor again if its a flop, which I'd bet anything it will be. How could Ben 'deliver' a QE3 with unemployment at 8.6, declarations that all is well, and markets while not great are nevertheless still close to all time highs?
Oil new floor would be around $120, and gold would also go up a few hundred, which they cant have either of. Theyve cried wolf and thrown their hole card way too much.
Euro is still very weak and the dollar showing surprising strength. The market should be selling off on this and yet it has not budged. Might be still holding out hope that Bernanke saves continue.
Bernanke is either a Hannakuh worshiper or an agnostic. BTW, he will be Gold & Silver's little bitch soon enough...
ECB buying U.S. 10 year (U.S. Treasury buying Italian and French 2, 5, and 10 years).
Last FOMC came out a few minutes early.
One wonders where and why the surge in foreign demand for safety came from. We will likely very soon know.
Hey, you're supposed to be the smart one.
But I will take a stab. C _ _ _ a:)
Central bank swaps.
The most massive bubbles are government sponsored.
FAS buy stop 61.79
FAZ buy stop 40.71
There MUST be some sort of INFORMATION DEFICITE in BOND BUYERS BRAINS
LOOK :
10 years ago any ( except zimbabwean ofc ) foreigner lets say European Investor bought for 100.000 USD 10 Year US treasuries He paid 112000 EURO for this investment... money he borrowed to the US Nation . He enjoyed some of the lowest interest rates .. next to Japan .. in the world ... Cumulated he received around 35 % ( may be a bit more..not much though )of the investment Capital in Interest during the dollowing 10 Years . Then after 10 years he recieved the Principal back. He received 100.000 USD equal to approx 74.000 EURO ..back . In all he thus received 135.000 USD worth approx 98.000 EURO ...as a TOTAL return of an investment of 112.000 EURO ..for 10 Years. Lets not talk about such a thing as INFLATION .. And according to US Financial Statistics .. there is NO Inflation ... almost ..
BASED ON THIS RETURN ON CAPITAL ( MINUS 14.000 EURO ) MEDIA HAVE PROCLAIMED US TREASURIES TO BE A SAFE_HAVEN . ...
A similar calculation of an US INVESTOR buying European Bonds 10 years ago would have left the un - patriotic US investor with approx 225.000 USD ... today ... but this kind of results are proclaimed to be UNSAFE ...they say in Media ..... these days .
There is something I must have misunderstood..apparantly .. It must be an Upside /Down world.. LOOSING Trades are SAFE HAVENS in the financial world of today .. especially if they are Anglosaxon Trades ... that is ... and WINNING trades ..in reality are Losses..and UNSAFE ... or what ?
But there are so many other things ..I do NOT understand .. in the world of Financial WIZARDRY ...AND PROPAGANDA
That said .. considering the current risk-appetite for Borrowingin the USA .. the US thus is closing in on 300 BILLION FUNDING DEMANDS / Month ... i ask .. Could one expect a similar development .. the next 10 Years.. especially now the Europeans ...have embarked on an AUSTERITY COURSE ?
Could one RISK to incur similar " LOSSES " if considering these risky European Bonds.. or is it SAFER to UPFRONT ..TAKE THE LOSSES ..and in the SPIRIT of INTERNATIONAL FRIENDSHIP put my SAVINGS in US TREASURIES ?
As long as they can keep enough fear in the market there won't be any QE3. People will run to the illusion of security in treasuries. Ben won't need to print and make up the deficit because in the paper worshipers eyes there are no other alternatives.
so you are telling me retirees will keep their money in usts, at their broker/dealer, earning no interest, for the forseeable future, w/ inflation at 10%
brilliant
I'm not saying it's brilliant. It's just a fact. It's Japan 2.0
except ther have been alernative investments, like gold
I don't think you read my comment. I said "in the paper worshippers eyes" not mine.
PS ... I did NOT use a Japaneese Investor in US TREASURIES ..as an example ( by the way some of the most eager US treasury buyers for the last decade ... almost UNBELIEVABLE ! )
I did not do this ... because I am POLITE .. and the results of such a Calculation may have been TOO MUCH to stomach ... for sensitive US Readers !
!
Golden opportunity.
You buy the 10yr at 2% yield, when the yield falls to 1.5% next year you sell the bond and make a handsome profit.
if that happened your real rate of return would still be shit
Quite the contrary.
Bonds trade at price, the lower yield the higher price and vice versa.
real rate of return
I say the Fed will not announce QE III today and the market will pop up 2-3%. This market is on steroids....nothing can stop it from pumping itself.
The market will most likely retreat for the next weeks. S&P resistance at 200 day MA is too strong.
remember - during the great depression leading up to the great war, the same people[?] were doing the exact thing as what's occurring today in the u.s. gov't financial markets. investing in negative yields just to preserve what money they had - hoping with fingers-crossed, that america would come out victorious [as it did?],... and, that they would have something tangible left, after the war betting on the right horse.
think of it as u.s.gov't issued debt v. confederate [southern] debt
Does anyone know what program Tyler uses to create these graphs?
The top bar/line chart wouldn't be too hard to put together in Excel.
The bottom one is a Bloomberg screen I think (but that is a total guess - ask the man).
Nothing new.
Fed Holds Rate Steady, Sees Economy Expanding 'Moderately'
'the market continues to drift off in some QE3 hopium-inpsired parallel reality'
I don't think there even needs to be a QE3. This reminds me of the Dot com mania befor it blew up. But hey, plenty of people think this time it's really different. After all the great USA could never be a bad bet right?/sarc