Interest Rate Roundup

Thursday, May 07, 2009

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.


  • Nice work, Mike. I agree, yields are going to go higher, higher, higher. China would be foolish not to begin diversifying out of USD assets into natural resource assets. They don't need to swap back to renmimbi! They have a first mover advantage like that of the savvy cats who shorted subprime in '07.

    Bernanke and Treasury are going to be in a world of pain if this great bond unwind continues. Mama mia.

    By Anonymous Anonymous, at May 7, 2009 at 2:00 PM  

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