Repo Market

David Stockman Offers "More Proof Of Janet Yellen's Idiocy"

"Anyone buying stocks based on confidence that the Fed has their back notwithstanding Wednesday’s action surely deserves the pounding just ahead. What Yellen had to say doesn’t even reach the status of babbling; it was flaming incoherence..."

Mediocre 30Y Auction Tails Due To Lack Of Short Squeeze

As expected, today's 30 Year tailed when it emerged in the repo market that there would be no short squeeze, printing at 3.170%, the highest yield since September of 2014, and also a modest 0.1bp tail above the 3.169% When Issued, a far cry from yesterday's 10Y auction stopping through by 2.0 bps.

Short Squeeze Drives Blockbuster 10Y Auction, Directs Surge

Following today's shortage of 10Y paper in repo, some expected that today's 10Y auction would be strong. Well, it was blockbuster: printing at 2.56%, it stopped a whopping 2bps through the 2.58% When Issued, confirming a last minute scramble for paper.

Mediocre Demand For "Tailing", 7Y Treasury

When today's 7Y printed at 2.197% (vs the 6 previous auction average of 1.883%) it tailed the WI of 2.196% by 0.1bp, as once again there were few overhanging shorts to squeeze. The internals were average at best.

Treasuries Extend Selloff Following Poor, Tailing 5 Year Auction

After yesterday's stronger than expected 2Year auction, there was speculation that with the repo market normalizing overnight, that the omni-present short squeeze on auction days would be absent today, and predictably, moments ago the Treasury sold $34 billion in 5 Year paper in a rather poor, tailing auction, which priced at 1.936%, tailing the When Issued 1.931% by 0.6bps.

Surprisingly Ugly, Tailing 10Y Auction Spooks Market

While it was less surprising that today's 10Y ended up being poorly digested by the market, the market was clearly shocked by just how bad today's sale of $23 billion in 10Y paper went, which priced at a high yield of 2.333%, a huge 1.9bps tail to the 2.314% When Issued.This was the biggest tail in the issue going back all the way to March of 2016.

Poor Demand For Tailing 5 Year Auction As Bid To Cover Slides

In what was almost a carbon copy replica of yesterday's 2 Year Treasury auction, moments ago the Treasury sold $34 billion in 5 Year paper, with rates all comfortably positive in the repo market, which explains why the 1.988% high yield once again tailed the When Issued of 1.976%. The tail of 1.2bps was the biggest since last July.

2 Year Treasury Auction Stronger Than "Tailing" Headline Thanks To Surge In Foreign Demand

With no pressure in the repo market anywhere along the curve, there was little probability of a "surprise" squeeze into today's 2Y auction, and predictably, today's sale of 2 Year paper closed with a wide tail, printing at 1.21%, some 0.6bps wide of the When Issued. However, while the yield was poor, the Internals were far stronger than the headline would suggest.

Chart(s) Of The Week: 'Lombard Street' For A New Age

Gold is collateral of last resort as it is near-universally accepted. Repo fails indicate, very strongly, collateral shortage. Put the two together and you get yet more evidence that central bankers really don’t know what they are doing. And, also like in Bagehot’s day, the repercussions are global.