Posted on 11/09/2023 11:19:54 AM PST by Kaiser8408a
Today was the Wreck of the USS 30Y Treasury. Disastrous Federal fiscal policies and Yellen’s slowness to refinance outstanding Treasury debt has created a mess. Biden’s nerves must be a wreck with Powell and Yellen managing the nation’s finances.
That’s the only way one can describe today’s 30Y auction, which many expected could be challenging after a mediocre 3Y and a subpar 10Y auction earlier this year, but nobody expected… this.
The bond priced at a high yield of 4.769%, which was below last month’s 4.837%, and just shy of the April 2010 high. But more importantly, it tailed the When Issued by a whopping 5.3bps, which was… well… terrible, because as shown in the chart below, this was the biggest tail on record (going back to 2016).
The bid to cover was just as bad: at 2.236 it was the lowest since Dec 2021.
The internals were even worse as foreign bidders (Indirects) tumbled from 65.1% to 60.1%, the lowest since Nov 2021, and with Directs taking down only 15.2%, banks (Dealers) were forced to step up and take the balance, or a whopping 24.7%, double the recent average of 12.7%, and the highest since Nov 2021.
This is a big warning flag because every time we have seen a surge in Dealer takedowns, some sort of Fed intervention – QE or otherwise – has usually followed and we doubt this time will be different.
So what happened? Well, maybe the bond market read our note from earlier this week in which we explained “How Treasury Averted A Bond Market “Earthquake” In The Last Second: What Everyone Missed In The TBAC’s Remarkable Refunding Presentation.” It may be difficult to fool the bond market for a second time.
(Excerpt) Read more at confoundedinterest.net ...
We are just ONE failed Bond auction from insolvency..................
> Biden’s nerves must be a wreck with Powell and Yellen managing the nation’s finances. <
Biden does not know who those two people are, let alone what policies they’re pushing.
So, yeah. We’re in great shape going forward. Not.
Titanic, meet iceberg.
I am amazed anyone would buy thirty year bonds at any price.
The true risk approaches infinity.
We are just ONE failed Bond auction from insolvency..................
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The bid to cover was just as bad: at 2.236 it was the lowest since Dec 2021.
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hey, anything over 1:1 coverage is GREAT for these guys!
maybe the yield curve will normalize with higher long term rates? 30 year USTB @ 7-7.5% or so?
> I am amazed anyone would buy thirty year bonds at any price. <
It’s risky, to be sure. But it’s not totally illogical. Suppose that next year the Fed reduces interest rates, even a little. They might do this to help Biden get re-elected.
When interest rates fall, bond prices rise. So those thirty year bonds will become more valuable. Dump them immediately, and take your profit.
.Gov is in worse shape than it was in 1981 when the thirty year bond rate reached 13.45%.
https://www.macrotrends.net/2521/30-year-treasury-bond-rate-yield-chart
At that rate I would consider buying some.
They are betting that the USA won’t be here in 30 years to pay off.......................
They are betting the USA won’t be here in 30 years to pay off..................They may be right............
considering today’s debt load, if the fed could get off a 30 year bond at 13.45% it would be a bonanza for yellen.
what if they had an auction and nobody showed up?
chyna, japan & BRICs are out, imo
Powell doesn’t “manage the nation’s finances”; the Fed is a monetary authority and plays no role in what the Federal gov’t spends. It can “monetize debt” by purchasing newly authorized Treasury debt, at the risk of further devaluing the dollar.
Yellen at Treasury plays more of a role, but it’s really Congress that decides Federal spending and the size of the national debt.
And no one has an idea of how to reign in Congress and keep it from putting America into greater debt.
But QE ==> Inflation. So they are between a rock and a hard place. They know they have to fight inflation, because failure to do so will cascade into hyperinflation, but raising interest rates means skyrocketing payments for government debt, as we see developing here.
TLDR - buy bitcoin.
“ Biden’s nerves must be a wreck ”
We have people who write stuff like this. No wonder we keep losing.
I remember the 1980’s. My car loan was 13%+ and I was glad to get it.
Young people today have been used to artificially low interest rates for so long they think it’s forever and normal.
It isn’t.
Things are worse than the Jimmy Carter years, globally.
I would not be surprised to see 15%+ or worse in the near term.
The economy will be destroyed overnight................
This chart is a bit old, but useful...............
I remember the 1980’s. My car loan was 13%+ and I was glad to get it.
Young people today have been used to artificially low interest rates for so long they think it’s forever and normal.
It isn’t.
Things are worse than the Jimmy Carter years, globally.
I would not be surprised to see 15%+ or worse in the near term.
The economy will be destroyed overnight................
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I hear ya loud and clear.
<> I remember prime was 21%
<> VA mortgage loans were 18%
<> There were NO conventional mortgage loans available until the states or counties came out with “mortgage bond” loans that were hard to find under 10%
<> add $5 gal gas with lines & alternating days to fuel up
<> silver was over $40 oz
<> Federal deficit in 1980 as $908 billion
<> Fed Chairman Volcker raised fed rate to 20%
<> unemployment 1983 was 10.5%
if you could get a car loan for 13.5% you had to have pretty shiney credit.
imo, we’re in a lot worse shape today
Can anyone explain what a bond tail is to me?
A couple of failed auctions and a 5%+ yield, and pretty soon people will get scared.
And angry.
An 8% yield is needed to bring the US economy back to reality, no matter the cost.
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