If one had to use one word to describe today's 30 Year bond auction, it would "atrocious." With the When Issued expecting the 30 Year refunding (CUSIP: RG5) to price at 3.40%, instead we got one of the biggest rails in recent history when the Treasury announced that the high yield required to sell $16 billion in 30 Year paper was a whopping 3.44%. To be sure, this was the lowest 30Y auction yield since June of 2013, however we may be reaching a point when there is simply no issuance demand for new paper. This was perhaps best seen in both the Bid to Cover which tumbled from 2.52 in April to just 2.09, the lowest since August 2011, and the hit rate of the Indirects, who took down 40.4% of the auction, and were hit for 99.7% of the bids tendered - a whopping result. Directs fled as well, taking down just 8.4% of the auction, the lowest since March 2013, leaving Dealers with 51.2% of the auction, the most also since March 2013.
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So was it a buyer's strike, or did the dealers simple game the auction in such a way to stop the relentless buying of the long end, and to indicate that there are fissures forming in the house of cards Treasurys, at a time when nobody can explain the relentless bid for both stocks and bonds?
Whatever the reason, the bond complex suddenly shook, with selling across the curve.
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Which magically recoupled bonds and stocks...
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What happens next is unclear, but if one was CNBC and had an interest in pushing lemmings not in stocks but bonds, this move would promptly be described as a "clear buying opportunity"... after all "where else can you put your money"?