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L******f
发帖数: 5368 | 1 链接：
http://seekingalpha.com/article/190362-something-very-strange-i
Something Very Strange Is Happening With Treasuries
There are times in life when one witnesses something so outside the scope of
normal experience, that at first you don’t see it.
Captain Cook’s diaries tell us that upon first seeing his ships offshore in
Australia, the aborigines expressed “neither surprise nor concern.” Cook
notes that it was not until he and his men approached the shore in smaller,
more familiar vessels that the villagers reacted, arming themselves as “the
sight of men in small boats was comprehensible to them: it meant invasion.”
Well, I had a similar experience during yesterday’s bond auction. Before
going into the details, we need to fully explain how a Treasury Auction
works.
First the Treasury issues a press release saying just how much debt is being
issued (sold) during a given auction. This release also says how much of
the Treasuries currently owned by the Federal Reserve are coming due that
day, the implication being that the Fed will likely use the funds from their
maturing Treasuries to buy some of the new debt issuance.
When it comes time for the auction, investors can either bid non-
competitively (meaning they’ll take whatever yield is available based on
demand) or competitively (meaning they have a minimum yield requirement and
won’t buy the debt if it yields less). Non-compete bids are accepted first.
After them comes the competitive bids until the total debt issuance is
complete.
So let’s say the Treasury is issuing $10 billion in ten-year notes. On the
day of the auction, the lowest competitive bid states it won’t accept
anything under a 3% yield. So, the Treasury starts filling non-competitive
bids at 3%. Once all the non-competes are filled, the Treasury starts
filling the competitive bids in the order of increasing yields (so those
competitive orders requiring a 3% yield are filled before those requiring a
3.5% yield) until the total debt issuance is met.
Once the Treasury auction is complete, the Treasury issues a press release
stating the highest accepted yield and the amount of Treasuries sold to non-
competitive bidders. The Treasury also reveals what percentage of
competitive bids occurred with each of the three bidders. These are:
1) Primary Dealers: those banks/ financial institutions that trade directly
with the Federal Reserve bank of NY (and so HAVE to buy Treasuries at
auction)
2) Direct bidders: those investors who place their bids directly with the
Treasury (also the easily track-able orders)
3) Indirect bidders: those investors who place their orders through direct
bidders (untraceable orders or orders made by buyers that cannot be tracked)
I realize this sounds complicated. The main issues are that the Treasury
issues debt. Some folks take it at whatever price they can. Some folks buy
it only if it yields as much as they want.
The Treasury first sells the debt to those who don’t care what it yields (
at the lowest yield the folks who DO care what it yields are willing to
accept) and then issues the remaining debt to those who DO care what it
yields first at the lowest yield accepted and then at higher yields.
Finally, of the folks who buy, some buy right from the Treasury (directs),
others buy through intermediaries (indirects). And if there aren't enough of
either, the Primary Dealers step in and buy the rest.
Ok, now onto yesterday’s auction.
Yesterday the Treasury issued $37 billion worth of four-week notes (meaning
debt that comes due in four weeks). The lowest yield accepted was 0.0000% (
literally NO yield) and the highest yield accepted was 0.055% (virtually
nothing).
Roughly, 27% of the auction took place at the highest rate. This means
nearly one third of the demand from competitive bidders (those who care
about yield) came at the HIGHEST yield that was accepted. In plain terms,
this alone tells you that investors want higher yields from Treasuries since
nearly a full third of the debt issuance took place at the highest REQUIRED
yield.
As you would expect, there were few non-competitive bids (who in their right
mind is willing to buy US debt without caring about the yield?): non-
competes only made up less than 1% of the bids. In contrast competitive bids
made up 97% of the demand.
Now here’s where things get odd.
Of the competitive bids (meaning those bids coming from folks who care about
yield), roughly 70% went to Primary Dealers (investors who HAVE to buy the
debt and who usually turn around and try to sell it afterwards). To put this
number into perspective here is the percentage of competitive purchases
made by Primary Dealers in the last four 4-week Treasury issuances:
Date of 4-Week Treasury Auction
Primary Dealers as % of Competitive Buys
January 5 2010
42%
January 12 2010
70%
January 20 2010
60%
January 26 2010
67%
February 2 2010
51%
February 9 2010
51%
February 17 2010
61%
February 23 2010 (yesterday)
70%
You’ll note that during the stock market correction that took place during
the end of January/ beginning of February, Primary Dealers didn’t need to
buy many Treasuries since investors were fleeing stocks and buying short-
term Treasury debt as a safe haven.
You’ll also notice that yesterday’s auction featured MORE buys from
Primary Dealers than almost any of those occurring in 2010. Remember,
Primary Dealers HAVE to buy Treasuries. So to see them buying a high
percentage of Treasuries at debt auctions means that few investors who can
pick and choose what to buy are actually looking to buy US debt.
In plain terms, a debt auction that features a high percentage of
competitive buys coming from Primary Dealers is BAD NEWS. It means investors
generally aren’t buying US debt. It also means that foreign governments (
those who have funded US debt auctions for decades) aren’t buying much
anymore either.
So the fact we’ve have three short-term auctions in which more than two
thirds of competitive buys came from Primary Dealers is worrisome to see the
least.
Now here’s where it gets even worse.
Of the remaining competitive buys (about $8.86 billion), only 32% came from
Direct Bidders or those who bought debt directly from the Treasury: orders
that can easily be tracked. The other 68% ($5.9 billion) came from Indirect
Bidders: folks who we cannot track.
Even more bizarre, only $5.9 billion in Indirect Bidder competitive buys
were ACTUALLY OFFERED. So we had a 100% acceptance rate for Indirect Bidder
competitive buys.
Let’s put this in perspective:
Date of 4-Week Treasury Auction
Indirect Bidder Acceptance Rate
January 5 2010
71%
January 12 2010
22%
January 20 2010
77%
January 26 2010
43%
February 2 2010
63%
February 9 2010
87%
February 17 2010
82%
February 23 2010 (yesterday)
100%
This means that the Treasury took up EVERY single cent of competitive bids
coming from indirect buyers. Remember, indirect buyers are usually assumed
to be foreign governments (even the Treasury website admits this).
If this was the case yesterday, then foreign governments barely bought much
of anything in yesterday’s auction (only 19% of total debt issued).
Moreover, it implies that Primary Dealers (those having to buy) had to gorge
on the auction to make up for the fact that few if any foreign governments
are interested in buying our debt anymore (including even short-term debt).
Or…
One could potentially argue that this indirect buying came from the Fed
covertly buying under the guise of an indirect bidder (the Treasury recently
changed the definition of what qualifies for an indirect bidder to make it
more vague). It IS rather odd that every single cent of competitive bidding
coming from indirect buyers was filled. It’s almost as if the indirect
buyers knew precisely WHAT yield to accept… OR were simply trying to take
up the slack in what was already a VERY weak auction.
I cannot tell you which of the above is true. Heck, neither of them could be
and something completely different could be happening. But regardless,
something very, VERY strange is going on in US debt auctions.
I wrote earlier this year that bonds, not stocks, would be the big story of
2010. We’re only into February and there are already some very unusual
things happening on both the long (30 year) and the short (4 week) ends of
the Treasury curve. And with the Fed’s Quantitative Easing Program
scheduled to end in March, things are about to get a whole lot more
interesting (barring of course an extension of the QE or QE 2.0).
Keep your eye on US Treasuries. Stocks, despite being so popular with
investors are usually the LAST to get what’s coming down the pike. And
investors just parked $30 billion for a month with Uncle Sam at virtually NO
YIELD yesterday.
Put another way, someone(s) is/are willing to not make money just for the
sake of insuring return OF capital (the US can always print money to return
it) rather than any return ON capital. | s******s
发帖数: 13035 | 2 什么样的NC会转过来一篇一年多前的时事文章过来啊
of
in
Cook
,
the
.”
【在 L******f 的大作中提到】
: 链接：
: http://seekingalpha.com/article/190362-something-very-strange-i
: Something Very Strange Is Happening With Treasuries
: There are times in life when one witnesses something so outside the scope of
: normal experience, that at first you don’t see it.
: Captain Cook’s diaries tell us that upon first seeing his ships offshore in
: Australia, the aborigines expressed “neither surprise nor concern.” Cook
: notes that it was not until he and his men approached the shore in smaller,
: more familiar vessels that the villagers reacted, arming themselves as “the
: sight of men in small boats was comprehensible to them: it meant invasion.”
| L******f
发帖数: 5368 | 3 分析预言和验证。
这都不懂。
只有分析预言，没有回顾验证，
谁知道谁说的对还是错呀？
脑残。
【在 s******s 的大作中提到】
: 什么样的NC会转过来一篇一年多前的时事文章过来啊
:
: of
: in
: Cook
: ,
: the
: .”
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