Bond Market Begins To Panic: Bids For 4-Week Bill Auction Crater, Yield Spikes

Less than two weeks ago, when previewing the upcoming debt ceiling battle which is shaping up to be far more contentious than most expect, we said to "keep an eye on T-Bill yields for the turning point when the market decides this situation is becoming serious."

Things officially turned serious yesterday, when as we reported, T-Bill yields spiked after the latest Jack Lew warning that the Treasury's emergency measures would be exhausted on November 3, or in less than 2 weeks, leading to a surge in mid-November T- Bill yields


But where the "serious" crossed over into "panic" territory, happened moments ago when the US Treasury sold $5 billion in T-Bills.

As expected, after five weeks of 0.000% high yields, today's yield soared in sympathy with what is happening in the secondary market.


But where it became decidedly clear that while stocks continue levitating without a care in the world, the bond market is now convinced that the 2015 debt ceiling fight will be worst than both the 2011 and 2013 iterations, is in the number of bids tendered into the auction.

At just $22.4 billion, this was less than half last week's $48.3 billion, and about 20% of the last year's $127 billion averaged tendered bids. This plunge in demand was below even the 2013 year-end debt ceiling fight. It was, in fact, so bad that it was the lowest amount of tendered bids since October of 2006, when central planning was merely a gleam in Ben Bernanke's eye.


The question becomes: what does the suddenly panicking - and revolting - bond market know about the debt ceiling showdown in 2 weeks that equities not only don't, but obliviously refuse to care about?