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The Treasury sells $13B in reopened 30-year bonds at 3.07% - the first time since May that the...

The Treasury sells $13B in reopened 30-year bonds at 3.07% - the first time since May that the auction's yields have topped 3%. Bid-to-cover ratio of 2.77, vs. a recent average of 2.61; indirect bidders take 37.8%. Direct bidders take 16.7%.
Comments (16)
  • wmateri
    , contributor
    Comments (531) | Send Message
     
    Let's see: 37.8% indirect bidders + 16.7% direct bidders = 54.5% total bids. Who bought the remaining 45.5% without bidding? How does this result in a bid-to-cover ratio of 2.77? What does this mean for the price of Treasuries? Can someone please explain to me.
    10 Jan 2013, 01:12 PM Reply Like
  • Jason Aycock
    , contributor
    Comments (107) | Send Message
     
    The other 45.5% are the primary dealers -- unlike direct and indirect bidders, primary dealers are required to bid in each auction.

     

    The upshot of that for prices: Because they're required to bid, the PDs tend to turn around and sell them in the secondary market, which brings prices down. Direct and indirect bidders are more likely buying to hold the bonds.
    10 Jan 2013, 01:18 PM Reply Like
  • wmateri
    , contributor
    Comments (531) | Send Message
     
    Thanks, very much and pardon my ignorance. Who are the Primary Dealers? Does this include the other banks, Social Security, etc?
    10 Jan 2013, 03:14 PM Reply Like
  • WMARKW
    , contributor
    Comments (10278) | Send Message
     
    In my simple terms, primary dealers are those "vested" by the FED with the abilility/requirement to participate in these auctions - I think they are generally afflilated with large banking houses. Here's a list from the FED

     

    Bank of Nova Scotia, New York Agency
    BMO Capital Markets Corp.
    BNP Paribas Securities Corp.
    Barclays Capital Inc.
    Cantor Fitzgerald & Co.
    Citigroup Global Markets Inc.
    Credit Suisse Securities (http://bit.ly/yvMlHo) LLC
    Daiwa Capital Markets America Inc.
    Deutsche Bank Securities Inc.
    Goldman, Sachs & Co.
    HSBC Securities (http://bit.ly/yvMlHo) Inc.
    Jefferies & Company, Inc.
    J.P. Morgan Securities LLC
    Merrill Lynch, Pierce, Fenner & Smith Incorporated
    Mizuho Securities USA Inc.
    Morgan Stanley & Co. LLC
    Nomura Securities International, Inc.
    RBC Capital Markets, LLC
    RBS Securities Inc.
    SG Americas Securities, LLC
    UBS Securities LLC.

     

    I find it kind of interesting that there are entities here that are not USA entities - just going by their names. Seems strange that you would allow the HongKong Shanghai Banking Corporation to be a "primary" dealer?
    11 Jan 2013, 03:36 AM Reply Like
  • Seth Walters
    , contributor
    Comments (675) | Send Message
     
    Even QE4 is failing to stop bond yields from rising. It should be interesting to watch a deflationary crash hit every asset at once when people realize what's happening and get out of everything.
    10 Jan 2013, 01:27 PM Reply Like
  • Machiavelli999
    , contributor
    Comments (829) | Send Message
     
    I think there are about three contradictions in your two sentences. Impressive and a whole lot of economic incompetence.

     

    Let's list them just for fun.

     

    First of all, to say that 3% rates means rates are rising shows some real lack of historical perspective. Rates are still super super low. Wait, I don't think I made my point clear. Rates are SUPER SUPER DUPER SUPER LOWW!!!!!!

     

    Second, rising rates is actually a sign of increasing INflation expectations, not deflation.

     

    Finally, rising rates is actually a good sign. Rates usually fall in deflationary crashes (see Japan or Great Depression or Great Recession). Increasing rates means inflation expectations are increasing because of better economic prospects.
    10 Jan 2013, 05:36 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10486) | Send Message
     
    MAC

     

    May i correct you as well. Money printing causes inflation as well. Has nothing to do with a better economy !!

     

    Not going to even list whats NOT improving...Lets just start with unemployment?
    10 Jan 2013, 05:53 PM Reply Like
  • Machiavelli999
    , contributor
    Comments (829) | Send Message
     
    Tell that to Japan. They haven't had inflation in 20 years despite countless rounds of money printing. And yet people like you are predicting hyper-inflation there, just like here, any day now, AAAAaaany day.

     

    How many decades of being wrong will it take you to change your mind? Obviously 2 is not enough. Three? Five? A century?
    10 Jan 2013, 06:59 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10486) | Send Message
     
    Really, Japan has been printing large sums, buying MBS as well? Then why is the new PM insisting on heavy printing...Someone can't put all the pieces of a puzzle together...amazing !

     

    If you think were the same as Japan then i see no use trying to explain it to you..

     

    BTW..If you want to insult people please go back to YAHOO!!
    10 Jan 2013, 07:11 PM Reply Like
  • eagle1003
    , contributor
    Comments (1507) | Send Message
     
    Seth: So, what's happening? (besides the fact that the markets are at five year highs)
    10 Jan 2013, 11:16 PM Reply Like
  • xan
    , contributor
    Comments (16) | Send Message
     
    MACH, at the very least your second point is irrelevant if we're talking about US treasuries (which is what the original comment you are criticizing was doing)

     

    "Second, rising rates is actually a sign of increasing INflation expectations, not deflation."

     

    with regard to treasuries, these have been artificially inflated (yields suppressed) by the FED. So bond buyers haven't necessarily been buying due to low inflation expectations its more that the FED have put a bid under the market. If the FED removed its bond stimulus now then rates will rise due to all the longs who bought just to get on the FED bandwagon rather than because they believed that inflation was rampant (or will be). Yields will rise because demand will drop, investors will sell bonds to lock in gains. The FED will not necessarily remove stimulus when they fear inflation. They could remove it just because it is not working. A rate rise now ,sue to falling bond prices, would choke the economy and deflation will almost definitely ensue like it did during the 2008/2009 crash.
    11 Jan 2013, 06:35 AM Reply Like
  • youngman442002
    , contributor
    Comments (5131) | Send Message
     
    The Primary dealers HAVE to buy the rest....that is why we can NEVER have a failed market...at least on paper...the PM´s sell them back to the Fed next week for a nice little fee.....its a scam..
    10 Jan 2013, 01:32 PM Reply Like
  • Machiavelli999
    , contributor
    Comments (829) | Send Message
     
    ^^^^^^^^economic incompetence
    10 Jan 2013, 05:37 PM Reply Like
  • Interesting Times
    , contributor
    Comments (10486) | Send Message
     
    MACH

     

    Hers more education for you. I guess he is wrong as well ???

     

    http://bit.ly/pY3R8e

     

    I tried!!! Good Luck...
    10 Jan 2013, 07:36 PM Reply Like
  • Machiavelli999
    , contributor
    Comments (829) | Send Message
     
    Yes he is wrong. People always think prices are getting higher. In 2009, the most deflationary year in 70 years people were asked what the inflation rate was and they said 10%. People are morons. All statistics, not just government, say we are in a very low inflation period. Even the price of gas that people like to cite is LESS than it was 5 years ago.

     

    But forget anecodatal evidence. Forget government evidence. There is private inflation indicators like MIT's Billion Price Index http://bpp.mit.edu/usa. Also simply think about how interest rates work. Low rates mean people don't expect inflation and are willing to hold treasury bonds that pay almost nothing. High rates mean inflation expectations are high and people require high rates of return prior to lending since they know that simply getting their money back will not suffice.

     

    This is very basic stuff taught by Friedman years ago. And its not that we forgot, I don't think we ever really learned it.
    11 Jan 2013, 02:05 AM Reply Like
  • mahanmd
    , contributor
    Comments (10) | Send Message
     
    I am a private investor. I have worked as a physician for over 20 years. I serve in the Army reserves and have been to the sandpit a couple of times. I have owned 2 of businesses that prospered and then sold at a profit. I am a student of history, and marvel at the folly of those who have never had the personal responsibility of employees, debt, or overhead making decisions for our country.
    I agree that inflation is higher than the CPI predicts. The selling of more bonds and deflating the dollar is having it's effect on that. Can our "friends" selling oil continue to stand for their product to be sold in dollars?
    Bond yields are way, way to low, and we will get back to interest rates seen in the late 70's before too long. A powerful weapon for foreign governments to own for sure. Mr.Bernanke will not be able to hold off the dogs for to much longer, and interest rates will rise. Banks sitting on cheap money will do well. It does not appear that our current government is caring about the economy at the moment. Taking guns away from law abiding citizens and making illegal immigrants voting citizens are apparently the most important considerations at the moment.
    The republicans will not be able to make headway with any spending cuts before going along with the president on raising the debt limit. As they often say on CNBC, "they will just kick the can down the road".
    15 Jan 2013, 08:48 PM Reply Like
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