Safety Scramble Leads To Record High Bid To Cover In $35 Billion 2 Year Auction

Tyler Durden's picture

Little can be said about today's $35 Billion 2 Year auction: it was nothing short of a complete scramble for cover in a piece of paper that comes due just around the time of the Fed's guaranteed ZIRP interval of mid-2013 (which will likely be extended). The result: an all time record high Bid To Cover of 4.07, the highest since records started being kept back in 1993. The yield was 0.28%, inside of the 0.285% When Issued level trading at 1pm. Yet notably, Dealers took down just 46.53% of the auction, the lowest since October 2010: this compares to 54.16% for the LTM period, and 52.57% for the prior auction. This is not unexpected considering the Primary Dealer issues in the aftermath of MF Global. Indirects stepped up and took home 42.24% of the final allocation - the highest since February 2010. Directs were in line at 11.24%, just below the LTM average of 14.30%. Overall, nothing says price stability like 0.28% on 2 Year paper. And so much for the Fed's attempts to sell the short end of the curve via Twist.

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GeneMarchbanks's picture

Twist Fail.

"I'm going back to the safety of my husband who beats me"

collegepunk's picture

the twist wasn't supposed to significantly affect the short end of the curve.  Even with the "selling pressure" they are putting on that end, rates weren't expected to rise.

BaBaBouy's picture

Bizarro Land ...


Everybody is scrabling to put there ASSets in Trash Fiats ...

fonestar's picture

Sitting here with my silver frying pan waiting for the lemmings to come over cliff's edge and into the fryer!

Archimedes's picture

Cue Robo Trader stupid "Uncle Gorilla" line in 3,2,1...

Cognitive Dissonance's picture

Can you imagine the epic FAIL when everyone realizes at the same time that they are holding US Gvt grade "A" toilet tissue?

GeneMarchbanks's picture

Now that you mention it. I.CAN.NOT.

'Life is the farce we all must play' -Rimbaud.

tim73's picture

2008 printed money comes back to daddy.

Troll Magnet's picture

Ha ha ha!  Just picked up a 2 oz perth lunar gold for my son at a HUGE discount!  

Thanks Ben Shalom and everyone else involved in doing God's work!  You guys work tirelessly so that I can continue to accumulate!  You guys rock!  XOXO

achmachat's picture

I see you're going for the added collectors' value.

I stick to maples; they're the best bang for the buck around here.

GeneMarchbanks's picture

The Philharmonic is, aesthetically speaking, unmatched. Those Austrians really got their shit together. Except for Erste... Erste is a criminal shithole.

Stumpy's picture

Yes, but when you find a limited mintage (and beautiful) item for spot, it may beat good ole maple.

Troll Magnet's picture

oh, i got plenty of maples, eagles, phils, krugs, libertads...but i have bought these and am still buying these specific lunar coins for my kids.  figure i'll give it to them when they're old enough.

mayhem_korner's picture



"Flight to safety" is what the rats thought when they heard the Pied Piper.

Shouldn't we soon see a downward revision in U.S. GDP from imploding exports?

Snakeeyes's picture
The European Investment Bank (EIB) Ski Slope Goes Black Diamond!



buzlightening's picture

Don't smoke around all this toxic flammable paper.  Won't take much of a spark to vaporize it.  Derivatives going super nova says it all goes at once.  Suddenly.  In an instant. Overnight!

tim73's picture

Risk off: Banksters go out to play.

Risk on: Banksters rush in crying, daddy FED takes good care of them.

youngman's picture

Amazing..a feeding frenzy for probably rated a 5 star restaurant too

LeBalance's picture

Zero Investment Return (Probably)

LawsofPhysics's picture

lots of bad paper chasing more bad paper, got physical?

slewie the pi-rat's picture

the twist is mo about keeping the long bond rate down; if the short end rate goes down, too, better for the goobermint in the short term

even the proverbial blind piggy is having trouble finding risk, today

with tyler's piece about the $52.5 B in bail-out digits due and payable toute suite, here's dougNoland [PrudentBear]  on the credit and bond markets last week, from his "ECB To The Rescue?" of last friday (paste/my emphases):

The two-year dollar swap spread rose 4 bps to a two-year high 49 bps. The 10-year dollar swap spread was little changed at 17.5 bps. Corporate bond spreads widened.  An index of investment grade bond risk rose 7 to 136 bps.  An index of junk bond risk jumped 31 bps to 759 bps.

November 16 – Bloomberg (Lisa Abramowicz):  “Corporate bond trading volume is plummeting in the U.S. to the lowest level in almost three years as concern deepens that Europe’s sovereign-debt crisis will slow the global economy.  The average daily volume of publicly traded investment- grade and junk bonds has declined to $12.4 billion this month, a 37% drop from January…”

It was another strong week of debt issuance.  Investment-grade issuance this week included Aristotle Holdings $4.1bn, American Express $2.3bn, General Mills $1.0bn, Norfolk Southern $1.0bn, Lowes $1.0bn, L-3 Communications $500 million, Williams Partners LP $500 million, Nisource $500 million, Kellogg $500 million, Stanley Black & Decker $400 million, FMC Corp $300 million, Clorox $300 million, Puget Sound Energy $250 million, Southern Cal Edison $250 million, Rockwell Collins $250 million, Pacific Gas & Electric $250 million and Indianapolis P&L $140 million. 

Junk bond funds saw inflows slow to $153 million (from Lipper). Junk issuance included Plains Exploration $1.0bn, Community Health Systems $1.0bn, Jaguar Holidngs $575 million, Host Hotels & Resorts LP $500 million, Duke Energy $500 million, Swift Energy $250 million, San Diego G&E $250 million, American Greetings $225 million, Carrizo Oil & Gas $200 million, Pioneer Drilling $175 million, and Atlas Pipeline $150 million. 

Convertible debt issuers included Air Lease Corp $200 million. (end paste)

almost $5 B in junk issuance and inflows slowed to $153 million(!)

and, if we look at the overall economic level, we see that the economy is styooopid, styooopid!  if the economic activity isn't helping people make enuf $$$s, why, that's what credit markets are for!  just borrow what you need and pay it back...later

yes,  BiCheZ, whole continents and the world's greatest wtfs are now borrowing the money to pay the interest on the debt they already owe, while planetary downgrades are being discussed by ratings agencies on uranus

Catflappo's picture

Meanwhile, Eurodollar futures continue to insipidly drift lower...

Beendare's picture

Can anyone direct me to an article or book that explains the intricacies of this treasury market?

Trying to get my arms around the raw data.....and I would like to be able to understand Rick Santellis reports



imsaul0968's picture


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