Central Banks Drop An Anvil On Bond Shorts In Today's 3 Year Auction

Earlier today, there was once again a massive scarcity of 3 Year underlying paper, when as the SMRA charts below show, the bond was trading the most negative in repo it has been since September: at a -1.68% rate, everyone was rushing to short ahead of today's 3 Year auction.


Then, with the latest tumble in rates, absolutely, everyone was convinced shorting today's 3 Year auction would be easy money.

And then the central banks showed up, in the form of a whopping 52.7% in Indirect takedown in the just concluded auction of $24 billion in 3 Years, which also was the highest indirect bid since December 2009.

End result: a high yield of precisely 1.000%, stopping through the 1.009% When Issued, and an auction which paradoxically was saved by the foreign central banks themselves (i.e., Indirects), with the shorts left cursing, among which perhaps the Fed itself.

The good news: since there is once again a bid for paper, stocks just turned green.