Passa ai contenuti principali

Bid to Cover Plunges In Ugly, Tailing, Largest-Ever 5Y Treasury Auction

Ever since the Treasury announced in its recent refunding that a substantial increase in Treasury auctions is coming to fund the massive budget deficit as a result of the coronavirus shutdowns, most auction sales had passed surprisingly well, without a glitch and with solid bidside demand despite plunging yields. Until today.

At 1pm the Treasury sold $45 billion in 5Y Treasuries, which in keeping with recent issuance, was also a record large notional for the tenor.

However, whether due to the record size, or due to the lack of concession in today's market which has seen yields slump sharply on renewed fears about US-China relations, the auction was an outright disappointment. Pricing at a high yield of 0.334, which incidentally was another record low yield for this tenor and below April's 0.394%, it tailed the When Issued 0.321% by 1.3bps, the biggest tail since December 2018.

Just like yesterday's 2Y auction, the Bid to Cover today also plunged, tumbling from 2.74 to 2.28, the lowest since July 2019, and far below the six auction average of 2.51.

The internals were also subpar, with Indirects taking down 57.3%, below the recent average of 50.1%, Directs accepting just $4.873BN or a 10.8% takedown, leaving Dealers with 31.8%.


Overall, this was a very poor auction and does not bode well for tomorrow's closely watched "belly-buster" record 7Y auction. And while dealers were quick to explain away the poor performance due to today's rally across the curve, we may have just gotten the first sign of buyside indigestion ahead of the upcoming tsunami of supply which may soon prompt higher yields especially if potential buyers start asking when the Fed will ramp up its own QE to ensure there is enough space to monetize all the upcoming Treasury issuance.

Commenti

Posta un commento

Post popolari in questo blog

Fwd: The Looming Bank Collapse The U.S. financial system could be on the cusp of calamity. This time, we might not be able to save it.

After months  of living with the coronavirus pandemic, American citizens are well aware of the toll it has taken on the economy: broken supply chains, record unemployment, failing small businesses. All of these factors are serious and could mire the United States in a deep, prolonged recession. But there's another threat to the economy, too. It lurks on the balance sheets of the big banks, and it could be cataclysmic. Imagine if, in addition to all the uncertainty surrounding the pandemic, you woke up one morning to find that the financial sector had collapsed. You may think that such a crisis is unlikely, with memories of the 2008 crash still so fresh. But banks learned few lessons from that calamity, and new laws intended to keep them from taking on too much risk have failed to do so. As a result, we could be on the precipice of another crash, one different from 2008 less in kind than in degree. This one could be worse. John Lawrence: Inside the 2008 financial crash The financial...
Posta un commento
Continua a leggere

3 Reasons Why Gold Will Outperform Equities And Bonds

3 Reasons Why Gold Will Outperform Equities And Bonds https://www.forbes.com/ 3 Reasons Why Gold Will Outperform Equities And Bonds For centuries, gold has played a major role in human history and has become interwoven into the financial fabric of society. Beyond its investment following, gold has become synonymous with wealth. Historically, gold's early use cases revolved around money – a form of "medium of exchange". After the second world war however, several countries and their respective currencies, started to shift away from the gold standard and migrated towards a fiat currency system. Today, gold remains largely a "Store of Value", and due to its unique properties and large number of use cases, it has managed to distance itself from other asset classes in terms of correlation, demand / supply drivers, and investment purpose. Gold's idiosyncrasies function as a double-edged sword, as it is challenging to predict ...
Posta un commento
Continua a leggere

China Market extends fall on talks of less stimulus

Headline indices of the Mainland  China  equity market closed down for second straight day on Tuesday, 23 April 2019, as profit booking selloff continued after a flurry of comments from policymakers signaled they're less comfortable about adding stimulus. At closing bell, the benchmark Shanghai Composite Index declined 0.51%, or 16.45 points, to 3,198.59 The Shenzhen Composite Index, which tracks stocks on China's second exchange, fell 1.32%, or 23.05 points, to 1,728.86. The blue-chip CSI300 index shed 0.16%, or 6.60 points, to 4,019.01.  Top-ranking policymaking bodies including the Politburo, the State Council, the central  bank  and the  Central Financial and Economic Affairs Commission  have all held meetings in the last two weeks.  China  should fine-tune monetary policy in a pre-emptive way based on economic growth and price changes, according to a top-level meeting reports chaired by  President  Xi Jinping.  Monetary po...
Posta un commento
Continua a leggere