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

Discussion in 'Coffee Shack (Daily News/Economy)' started by Goldhedge, Feb 8, 2018.



  1. Goldhedge

    Goldhedge Moderator Site Mgr Site Supporter

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    Rate Revulsion: Bid To Cover Tumbles In Ugly, Tailing 30Y Auction
    [​IMG]
    by Tyler Durden
    Thu, 02/08/2018 - 13:16

    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.

    [​IMG]

    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.

    [​IMG]
     
  2. nickndfl

    nickndfl Midas Member Midas Member Site Supporter ++

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    The talking heads are saying people got caught thinking artificially low interest rates would be around forever and now they are taking hits in the stock and bond markets. It was obvious that rates would eventually go up and they are actually moving faster since the economy is heating up quickly.

    CNN will probably say how a good economy with more people working is actually bad for you.
     

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