RALLY ON!

And the stock market goes up on the news....I give up.

Would you buy a bond from this man?

Question: Does "allotted at high" mean the amount of the issuance that went out on the high tick? IOW, 61.57% of the issuance was sent out at 4.72%, where the remaining 38.43% went out below that and above 4.536%?

@eleua - certainly appears that way to me

El, correct.

Is this a reflation rally? WTF, doesn't it really mean that it is going to be increasingly difficult for the government to fund its BS Kenysenistic deficit spending.

Does this explain the spike in gold?

No, the gold spike came in two hours before the auction. That was off the EU nonsense, and appears to be a response to fear that the EU Will somehow play "print money."

I don't see it, but it's what the market believes for today.

Just wondering outloud, but if they can't sell bonds, even with the Euro Crisis, then might not stocks be a place to escape some of the BS?

Consider for example stocks like KFT, MO, HNJ(Heinz?), that have fairly solid dividends( I hope), and less exposure to the Bezzle, and Financing shananigans? Granted if we are going to see everything hit the fan soon, then cash will be king. But, if investors out there looking for a yield wants some security maybe they are looking in those places as an alternative to US Bonds?

In some ways good old fashioned consumer staple stocks look attractive in this sense. What say you guys?

Comparatively, yes.

The problem is that if and when margin calls get going EVERYTHING gets sold. When the market is running on leverage - as it is now, and as it was in 2007 - you're risking these stocks getting destroyed irrespective of whether they have a solid business or not.

I want to buy them WHEN that destruction happens, not BEFORE it happens.

Obviously if we go into a deflationary collapse with all of this Euro debt collapsing then I think we will earnings for every industry tank also. But, I would think everyone will still need food.

Yes people will still need Ketchup, but I think what Gen is saying is that large holders will be forced to dump the stock of the company. So buy it after the dump.

http://www.zerohedge.com/article/just-ho....

Great post on ZH related to this thread.

Agreed Gen and Sqmo!

I guess uncle sam is anyway purchasing equities so in essence support the bond auction on one hand and buy shares with the other. Even the printer of last resort eventually won't be able to keep up.

From the zerohedge article quoted above:

Quote:

And here is the crux: the black swan will be not so much a totally failed auction - we are confident the Federal Reserve will never let that be the precipitating factor for the next crisis. All that is needed is for interest rates to start going up. That's it. How much longer can money be printed out of thin air so that we can all buy each other's debt and prolong the fiat fallacy for another day or two?

Quote:

But consider this: all countries, and especially those to the right in the chart, are enjoying exceptionally favourable financing positions, with government bond yields near unprecedented lows. Should anything push bond yields higher, even by just a percentage point, the onbalance sheet debt situation will become explosive.
....

Apparently heroin addicts can become so drug dependent their bodies cannot withstand the shock of withdrawal, and failure to continue taking the drug triggers multiple organ failures. I just wonder how apt that analogy is to our governments? debt dependency today. As long as governments think that taking these difficult decisions to end the addiction will be easier in the future than it is today, they will never take the decision "today." At the very least, there will have to be a sufficiently large bond market "event" to force the issue.

Excellent article, thanks for passing that on. The graphs alone are reason enough to read it; the narrative is just the icing on the cake.

Santelli just said that the majority of guys he spoke with on the trading floor believe that the Treasury PPP (plunge protection program) is responsible for the huge indirect bids.

Snake meet tail.

My favorite explanation of events since March...

Eleua wrote..

Question: Does "allotted at high" mean the amount of the issuance that went out on the high tick? IOW, 61.57% of the issuance was sent out at 4.72%, where the remaining 38.43% went out below that and above 4.536%?

Genesis wrote..

El, correct.

It would seem to me that particular print and the disproportionate amount of debt that went out on the high tick would portend much higher rates in the near future, or much less participation and a possible, genuine failure (as much as our PD system allows).

Do you guys see it the same way, and why this auction got an F?

Slightly off topic but then not: the most transparent of all centralbanks is the Swedish Riksbank. They simply state when they expect to do what when it comes to yields, and they do it publicly on their website.
Today, the Swedish Riksbank announced that it expects to start raising rates earlier than expected (late summer compared to fall) and that they would expect the repo rate to reach 4% in 2013, compared to 0.25% at present ... these expectations are of course based on forecasts of inflation and GDP-growth, but if the Swedes believe, that a CPI reading of 3.1 % a year and GDP-growth of 3.1% (expected in 2013)would raise the repo rate to 4%...

If you like to practice your Swedish, here is the link:
http://www.riksbank.se/templates/Page.as....
If it's a no go, just look at the graphic elements - KPI means CPI, core price inflation, and BNP is GDP.

Re gold spike..............

Quote:

That was off the EU nonsenseand appears to be a response to fear that the EU Will somehow play "print money."

I don't see it, but it's what the market believes for today.

The EU nonsense focusing on Greece as you've mentioned is relatively small tamales compared to Ireland and the rest of the little piggies at the trough. It's these other little piggies that will force them to play print money soon enough. The bond market is already anticipating this development among others with these continuous auction blips. BTW, what other alternative solutions to printing does the EU really have? I can think of only one: 0.

Afterall they have our printing model to follow and they can see how well that has done keeping things from going nuclear. The race to the bottom ultimately requires printing as it were. Everybody is gonna eventually get on the kick the can gravy train until it looks like used Alpo. After our November elections however that particular can is gonna get even more liquid and odorous. There is not enough political testiculars to change the outcome beforehand. This is just the trailer part of the horror movie. I also expect gold will continue to spike when the EU formally announces their printing press is now officially synchronized with our's. It's inevitable IMO.

.......................

In Debt We Trusted

http://www.usdebtclock.org/

And here is MarketWatch's take:

BOND REPORT

Feb. 11, 2010, 3:39 p.m. EST
Treasurys down after last auction of the week
By Deborah Levine, MarketWatch

NEW YORK (MarketWatch) -- Treasury prices inched down on Thursday, pushing 10-year yields to the highest in a month, after tepid demand at the government's final auction of the week.

Yields on 10-year notes (U.S.:UST10Y) rose 3 basis points to 3.73%. Yields move inversely to prices and a basis point is 0.01%.

Yields on 2-year notes (U.S.:UST2YR) were little changed at 0.87%.

The Treasury Department sold $16 billion in 30-year bonds at a yield of 4.720%, a little higher than traders expected.

Bidders offered to buy 2.36 times the amount of debt being sold, compared to an average of 2.24 times at the last four sales. See results of Treasury auctions.

"Follow-through was quite neutral, if not outright positive, as the market quickly recovered" back to levels before the auction closed, said Morgan Stanley strategists Igor Cashyn and Jim Caron.

Indirect bidders, a group of investors that includes foreign central banks, bought 28.5%, compared to an average of 39.8% of the last four sales. Direct bidders, which include domestic money managers, purchased another a record 24.1%, versus 10.4% on average.

A higher proportion of an auction going to indirect and direct bidders is deemed good for the government and the market because it indicates better demand for the debt by investors who will tend to hold the new securities.

It's also better for the bond market because it leaves less in the hands of primary dealers, which tend to turn and sell some of the new debt into the market, pressuring prices.

The auctions were expected to be more difficult given that it's a holiday in Japan, said strategist at RBS Securities. Also, solid technical support for the long bond is at a much higher yield and recent sales have come at higher yields than traders expected.

Yields on the current 30-year bond (U.S.:UST30Y) increased 4 basis points to 4.68%.

http://www.marketwatch.com/story/story/p....