Poor 30 Year Auction Accelerates Bond Market Selloff

After yesterday's ugly 3 and 10Y auctions, of which the latter is still trading at a record "fails" charge in repo, there were few hopes for today's 30Y auction, especially in light of the dramatic blow out in yields profiled moments ago. Well, it's a good thing expectations were low because the just concluded reopening of $12 billion in 29Y 11 Month paper was the latest bond debacle, with the paper tailing the When Issued by 1 bps, printing at 2.475% compared to the 2.465% When Issued.

The internals were even worse: the Bid to Cover to 2.129, down from 2.24 in August, the lowest since February and far below the 6mma average of 2.35. Indirect interest dipped from 61.5% to 57.9%, below the 63.9% average, leaving 37.5% to Dealers, the highest since last August, while Directs ran away, as they did in yesterday's auctions, taking down just 4.6% of the paper. This was the lowest Direct Bid since 2009.

Finally, with the auction weak because of the market, the market dropped even more because of the auction, and as Bloomberg reported moments ago:

  • TREASURIES EXTEND DROP AFTER 30Y AUCTION TAILS

Confused by what is going on? Don't worry, so is the BOJ which is responsible for all this chaos, and bonds will likely continue to slide until the Sept 21 BOJ announcement at which point either more easing will be required or the VaR whock will result in a supernova of P&L losses for anyone who still holds bonds.