Weak Two Year Auction May Be Jackson Hole Harbinger

Tyler Durden's picture

Moments ago the US Treasury auctioned off the latest monthly batch of 2 Year bonds, this time $35 billion, or toward the higher end of the issuance range, which was a bit of a dud. Pricing at 0.273%, this was a brisk move from July's record low 0.22%, a weakness which was substantiated by the expected pricing of 0.266% even though the When Issued traded at 0.275% coming into the auction, so technically there was no tail. That said, a very modest 9.01% was allotted at the high yield, implying the bulk of the action in the Dutch Auction was below the closing yield. Beneath the headline, the internals were not pretty either, with just 22.3% of the total bond taken down by Indirect bidders, well below the 32.78% TTM average, demanding an increase in both the Direct and Primary take downs, the former taking down 16.08% while the Dealers having to push 54.66% of the entire auction promptly into the tri-party repo market in exchange for cash to be used for much wiser purposes, such as buying Las Vegas REO real estate and converting it into rentals. Was the weakness of the auction a harbinger of disappointment from Jackson Hole - stay tuned for an opinion from Credit Suisse which says precisely this. And while the auction itself may have been unspectacular, there is a very historic aspect to this particular $35 billion bond issue, which we will reveal after market close.

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fonzannoon's picture

Locking in 2yr paper for a quarter of one percent. That's where we are at.

lolmao500's picture

Which is completely ridiculous. The only way you make money is if there's massive deflation in the next 2 years. And with food and gas shortages, not to mention QE, wars and insane deficits, good luck with that.

LawsofPhysics's picture

Exactly.  Personally I am waiting for negative interest rates so that the bank can pay me to take out another business loan.

Randall Cabot's picture

Goldman Sachs low-balls Bernanke’s Jackson Hole speech


August 28, 2012, 1:23 PM

For weeks, markets have built up expectations for Federal Reserve Chairman Ben Bernanke to make a major policy announcement at the central bank’s symposium starting Friday in Jackson Hole, Wyo.

But economists at Goldman Sachs, led by Jan Hatzius, don’t expect his speech to "shed much additional light on the near-term tactics of monetary policy beyond last week’s FOMC minutes," according to a morning note.






Racer's picture

market watch? That old spin machine still online?

roadsnbridges's picture


16 trillion yippees!

Jlmadyson's picture

And soon to be $17 trillion by year end.

Oh yea did anyone see the first thing the RNC guys did was put up a national debt clock in the convention? Plus one for the amount accumulated during the convention heh.

Those dealers having to force that kool-aid down and like it.

Randall Cabot's picture


Get Your Money Out of Morgan Stanley—Fast!

Aug 27, 2012

With the stock price of Morgan Stanley (NYSE: MS) inches from its Armageddon lows of Oct. 2008, whispers of the imminent overnight collapse of this U.S. broker-dealer begin to surface. Client funds, again, are at risk.

"I’m hearing rumors that another major financial house

Read more: http://www.beaconequity.com/get-your-money-out-of-morgan-stanley-fast-2012-08-27/#ixzz24rcJDD2r

TrustWho's picture

After Lehman, Daddy Bernanke will not let this happen. I do not know how, but laws will not stop him from saving the world. Who is going to stop him?

NotApplicable's picture

Who says he wants it saved? Besides, Lehman was a take-down, with the added bonus that it gave him a mandate to "not let it happen again."

All you're doing here is carrying water for the eventual, inevitable,, "priced in" (or not) next bailout that willl occur, at some point.

To believe that Bernanke is doing anything other than "what he's told" is to mistake the puppet for its master.

Cursive's picture

TD, what's with the suspense at the end of the post?

NotApplicable's picture

He doesn't want to tip off the algobots?

Never One Roach's picture

I'll consider buying Treasuries when they regress to their mean of 8% or higher.