Rate Revulsion: Bid To Cover Tumbles In Ugly, Tailing 30Y Auction

Earlier today we warned that, all else equal, should the day's 30Y auction be ugly, it could send the Treasury complex reeling, unleashing another equity selloff. Well, stocks frontran that, and heading into the auction, stocks tumbled as yields jumped over the source of the day once again, only to slide as a flight to safety emerged, dragging the entire curve lower.

Which was very lucky for today's 30Y auction which was, in a word, ugl.

The sale of $16BN in 30Y paper stopped at 3.121%, a 1.2bps tail to the When Issued 3.109%. This was the highest yield on the long end going back exactly one year, or February 2017, when the 30Y priced at 3.169% at which point the curve started to dramatically flatten.

But it was the internals where the auction was even worse: the Bid To Cover of 2.257 tumbled from 2.741 in January, and was the lowest since November; it was also below the 2.417% 6 month average.

Meanwhile, confirming recent reports that foreign buyers are fleeing US paper, the Indirect award was only 61.2%, far below the 71.5% last month, and the lowest since September, not to mention well below the 63.9% 6MMA. Directs took down a modest 8.1%, leaving 30.8% to Dealers, the highest since November.

Overall, this was another poor auction in the aftermath of yesterday's abysmal 10Y, and only the flight to safety to TSYs - as a result of the sliding stocks - has prevented what would have been a sharp selloff in equities anyway.


Praetorian Guard Thu, 02/08/2018 - 13:21 Permalink

Close to tearing the seams apart... 5% and the fat lady sings. This is not the 70's at 18+ Volcker interest. You would have a better chance surviving the walking dead, than an 18% yield in today' environment...

Though, ever once and a while a colon purge is required...


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RealistDuJour Thu, 02/08/2018 - 13:37 Permalink

So the DJIA is 25% higher than when the yields last peaked at this point exactly a year ago.  The S&P is up 14% since then.  Very scary times we're in.  Scary.  Where will we be in in a year if this is some kind of signal???

bigloser Money_for_Nothing Thu, 02/08/2018 - 13:47 Permalink

I certainly hope you're right on deflation. Everything's too expensive. Just met with some fool who wanted $950/month + utilities + other expenses to lease his CLOSED 56-seat bar and restaurant in a tiny upstate NY village with closed storefronts everywhere.

I had to hold back a laugh when he said I could buy the whole shooting match for a mere $150k.

I'm glad things may be getting worse for lots of people, just so I can feel better. Honestly, I was really, really getting tired of seeing stupid people think they're successful because their 401k was up 10-20%.

Assholes everywhere. Burn the fucker down.

In reply to by Money_for_Nothing

bigloser Thu, 02/08/2018 - 13:41 Permalink

Glad ZH allowed me to re-enter under another name after my month-long banishment.

I would not want to miss commenting on the grand collapse of the "strong" economy.

I've been posting the Dow declines on my facebook page the past few days, saying, how's your retirement going? Getting more than my fair share of snarky comments.

Since I'm 64, most of my friends are roughly the same age and heavily invested in STOCKS! RAH!

Gotta admit, I'm no genius, but I certainly didn't put all my eggs in one basket. I'm in silver and RE, which also both suck, but, I like being a dick.

Chocura750 Thu, 02/08/2018 - 15:03 Permalink

Does the Fed have to sell the Treasuries on its balance sheet?  I know the Fed buys Treasuries to increase the money supply, but why does it need to sell? 

REAL MONEY Thu, 02/08/2018 - 15:55 Permalink

What we are not hearing is that China downgraded U.S. debt to BBB+.  That was a moment that is being glossed over or ignored by the media but is critical to what is going on.  They said that it was no longer in their best interest to continue to buy U.S. TREASURY'S. Translation, as the ones they are holding mature they will cash them in and not replace them.  Japan followed suit with a similar announcement.  So let's see:  China isn't buying any more and in fact cashing out as they mature, Japan isn't buying anymore, The U.S is raising their debt ceiling to increase infrastructure spending and pay for an ongoing rise national debt, and the Federal Reserve is supposedly unwinding their balance sheet.  This slow moving crash is just starting and it ends with a total rejection of the $.  It will accelerate rapidly when China gets back from the New year and ramps up the Petro Yuan trade.