Today's Bond Auction: Remarkable Enthusiasm

| About: SPDR Barclays (TLO)

12:47 p.m. ET: The Treasury in a scant 30 minutes will complete the March refunding cycle with an auction of $11 billion Long Bonds.

The issue is cheap on the curve. It lags 10s, 5s , and bond contracts.

Speculation is rising that the Fed will end up buying Treasury debt and is watching the actions of the Bank of England to gauge results.

There has been robust buying today by money managers and speculators in off the run bonds and in the bond itself.

The market trades well and there is demand.

The short run negative is that the price action since yesterday has squeezed out any professional short base.

Currently the issue trades at 3.65 percent. I would expect a 2 basis point or 3 basis point tail to clear the market at auction time.

1:18 p.m.: So much for supply being a problem. There were not enough bonds to go around and the auction stopped at 3.64 percent. One could have procured it around 3.68 percent in the cash market prior to the auction. So I guess we have a negative tail.

The reason for the spectacular result is the actions of indirect bidders. Since bonds resurfaced in 2006 to fund imperial adventure indirect bids have totaled 29 percent and 21 percent in re opened bonds such as this.

In this auction the indirect category won 45 percent of the bonds. That will leave some who missed the suction scrambling to get even.

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