Bond sale bombs

Yikes -- did you see that intraday chart on the long bond futures? Nasty! The government just sold $14 billion of long bonds at a whopping 4.288% yield. That was far above pre-auction forecasts for a yield of 4.192%, according to Bloomberg. The bid-to-cover ratio came in at just 2.14, compared with a 10-auction average of 2.24 and a last auction showing of 2.4. Only 33% of the bonds sold to indirect bidders. That was above the 26.1% average of the last 10 auctions, but well below the 46.2% reading at the last auction. At last check, LB futures were off 1 29/32 after trading weak earlier in the session. Ten-year yields are shooting up 11 basis points to 3.3%.

And don't let anyone tell you no one saw this coming either. Here is my analysis from early December, in which I said that the Treasury market was well into bubble territory and that a "day of reckoning" was fast approaching.