Bond Yields Jump After Ugly 10Y Auction

Remember: the catalyst for last Friday's 666 Dow point plunge had nothing to do with a surging VIX and everything to do with bond yields blowing out to 2.85% after the stronger than expected hourly earnings number (which was largely the result of a drop in weekly hours worked).

Well, it may be time to batten the hatches again because as we warned first thing this morning, it is time keep an eye on today's 10Y auction for an indication if last week's yield's jump would continue. It now appears that indeed the primary driver for the selloff may be here after an especially sloppy 10Y auction, following yesterday's subpar 3Y.

Here are the details: the 10Y auction stopped out at 2.811%, a 0.8bps tail to the When Issued 2.803%, and the highest since January 2014. The internals were also mediocre at best: the Bid to Cover dropped from 2.69 in January to 2.34% in February, and below the 6 auction average of 2.43. Indirects also pulled back, with foreign buyers taking down 67.5% of the auction, down from last months' 71.4%, if modestly better than the 6 month average; Directs were awarded 5.4%, also below January's 6.5% while Dealers were left with 27.1%, an increase from last month's 22.0%.

Overall, this was a surprisingly poor auction, which however may be mitigated by the fact that it took place just minutes after the Senate announced a bipartisan deal which sent yields to session highs.

And, in kneejerk response to both the Senate deal announcement and this poor auction, the 10Y is now at 2.83%, and fast approaching the level which prompted the equity selloff last Friday.


Dilluminati Wed, 02/07/2018 - 13:18 Permalink

Take the guaranteed money, grab it while you can!   Take the profits of 30% dow and then multiply that by 2.8% compound, BECOME THE BANKSTER!!!!!!!!!

REAL MONEY Wed, 02/07/2018 - 13:23 Permalink

You can print money and throw that money at the bond market to keep rates suppressed and ultimately that money will go into the stock market, but by doing that printing you will continue to weaken the dollar and ultimately lead to hyper-inflation.  Or you can unwind your balance sheet and compete with the additional bond funding and ultimately blow out rates which will crash the stock market.  So you either kill the dollar or you kill the stock and bond market.  You can not have it both ways and Monday clearly showed that.  My guess is that they prop up the stock market at all costs so pension funds can stay liquid and they hyper-inflate the dollar which will be rejected by our eastern friends.  Anyways the death of the dollar is close at hand.

mailll REAL MONEY Wed, 02/07/2018 - 15:08 Permalink

Good point Real Money. 

Once again, just a reminder of their plans:…

These days though, I don't think we will run into hyperinflation unless the common citizens are given free money to spend on consumer goods such as houses, cars, boats, etc.  We ran into inflation back in 2008 and before, leading up to the financial collapse, because of all the easy money...esp. credit cards, which were handed out like candy, but it wasn't hyperinflation. It was inflation though. Even now, the housing prices are climbing again.  And I believe the reason for this is the feel good effect of pension and 401K's, and the willingness of bankers to once again offer the loans they are presently offering. 2008 all over again.

Right now the inflation is in stocks and bonds because of the reasons you stated. And anything else they throw printed money at.

But seriously, do you really think that caring about pension funds is on their agenda?  I think more anterior motives are on their agenda. There goes my conspiracy mind again, always acting up. As for the Monday Dow Dive, I really think it was the Fed that caused it, to get back at Trump for tossing Yellen out.  I think they just wanted to let Trump know who is really at the controls.

By the way, if they want to crash everything, all they have to do is stop printing and start withdrawing.  Their game is that simple.  


In reply to by REAL MONEY

mailll Rick Cerone Wed, 02/07/2018 - 15:18 Permalink

I wonder where all this is going to lead.  North Korea can barely get their missiles off the ground and the rhetoric is that they will be able to reach us in 6 months?  B.S. I guess the US military has to once again get rid of all their old shit so they can buy new weapons from their military industrial complex buddies, so they can make even more money.  You can't make money if you produce stuff but don't sell it.  You have to create the need. Create the war, and you create the need.

In reply to by Rick Cerone

Ink Pusher Wed, 02/07/2018 - 14:08 Permalink

Good grief,

I can't even begin to believe the blatant,fragrant,unabashed,unmitigated gall of these lying,cheating,honor-less,unscrupulous,depraved motherfuckers.

Get back to me when the 10Y is back down to a realistic -1.9%.


VZ58 Wed, 02/07/2018 - 16:27 Permalink

So now bonds are the way to go again? I thought it was let it ride and buy moar stawks all the way to the promised land? My neighbor told me so...