Bonds Sell Off Following Very Weak 30 Year Auction

Minutes ago the Treasury auctioned off yet another block of $16 billion in 30 Year bonds. The auction was pretty horrible: the When Issued was trading at 3.155% when the press release hit that the bond cleared at only 3.199%, a huge 4+ bps tail for the longest duration paper. Internals were not pretty either: the Bid to Cover dropped from 2.94 to 2.40 and Dealers had to buy well over half again or 55.7% with Indirects taking a meager 28.4%, and the remaining 15.8% going to Directs, nearly half of the 29.5% from October. Obviously this is the inverse of what happened in Italy today, when the tail was a negative 150 bps and the 1 year Bill closed at just over 6% with the WI trading in the mid-7%'s. Perhaps the global banks, in an attempt to preserve the Ponzi one more time, pushed all their freely allocatable and repoable capital into Italy and had far less left for long US paper. Nonetheless, the yield at 3.199% was just the second lowest. We salute anyone who believes that as central banks are about to set off on a record printing episode to bail out Europe, that inflation will not rise. Needless to say, the weak auction pushed the entire treasury complex lower, as senn by the second chart of the 30 Year following the auction. With this auction, the refunding trio of issuance for the week is over and when all is settled on Monday, total US debt will be just shy of $15.1 trillion. We are so lucky that the Supercommittee is working up to snuff even as the next debt ceiling hike is rapidly approaching.

30 Year bond yields with the auction announcement marked: