Our spy on a Treasuries desk has some interesting things to say via the mailbag about the bond market in the imminent face of $300 billion in quantitative easing by proxy:
Wall Street Dealers are giving the Treasury the biggest "fuck you" on new Treasury debt. There's an auction today and a buy program tomorrow. Since Bernanke just announced that the Treasury is buying bonds, Wall Street- the dealers en masse- are basically refusing to show a good bid but then taking out a huge profit out of the Treasury. You want to talk 90% taxes? This is unprecedented.
Hell hath no fury like a bond trader scorned? We aren't so sure. The UK had similar problems today.
The U.K.'s effort to buy government debt wasn't enough to prevent today's failed auction of 40-year gilts, the first time that the government failed to attract enough bids at a sale of nominal debt since 1995. Investors bid for 1.63 billion pounds ($2.4 billion) of 4.25 percent notes, less than the 1.75 billion pounds offered."The failed gilt auction doesn't bode well for Treasuries," said Michael Franzese, head of government bond trading for Standard Chartered in New York. "It is a supply issue on top of that. Is the buying that's happening today by the Fed going to offset the selling that's going on today and tomorrow by the Treasury?"
What say you DB? The largest bond price fixing conspiracy in history? That would be quite entertaining.
Treasuries Fall as Five-Year Note Auction Draws Yield of 1.849% [Bloomberg]
Posted by guest , Mar 25, 2009 2:12PM
looks like the Street has taken on the government employee work ethic now to reflect their new pay caps.....
Posted by Novice , Mar 25, 2009 2:25PM
I would laugh maniacally if this happened, but I will believe it when I see it.
Posted by guest , Mar 25, 2009 2:33PM
the feel good story of the year!
Posted by guest , Mar 25, 2009 2:33PM
the feel good story of the year!
Posted by guest , Mar 25, 2009 2:53PM
@ 2
get long TBT
Posted by guest , Mar 25, 2009 3:00PM
playing for a tail in 5s is hardly stepping away. but this story has been thrown around a bit since last week.
Posted by guest , Mar 25, 2009 3:00PM
@5 and GLD and then .223
~the Muleskinner~
Posted by guest , Mar 25, 2009 3:13PM
Bond investors gently reminding the Beard that they too have a say in matters.
No way that bunch of mooks could collude, though. They'd sell uranium to Iran for an extra tick on their P&L.
Posted by Investorcluzo , Mar 25, 2009 3:25PM
TBT up 17% since the barron's article about shorting treasuries, I do believe that beats the obama portfolio...
@5/@2 - I would also go long guns and butter (you saw what happened in oak, right?).
Posted by guest , Mar 25, 2009 3:32PM
@ 9 - this is why i have a costco card
i'm also long soup and bread in addition to my butter position which is currently parked offshore to avoid obama-nomics coming butter tax
i like SLV as well. GLD is pricey for me here. very afraid of a gold bubble
Posted by Novice , Mar 25, 2009 3:33PM
@5 One of my bosses always gently hinted that I was idiot for not knowing why ultrashort etfs wouldn't just behave like a 1x levered short. I prefer to just watch the fireworks with the over-enthusiasm of a moron.
@8 A professor asked me to write a paper on social norms among traders leading to collusion. I laughed.
Posted by Investorcluzo , Mar 25, 2009 3:45PM
@11 - ultra short/long etfs are based on daily moves, so it's possible to underperform the 1x levered short/longs. definitely, not for the buy and hold type.
Posted by guest , Mar 25, 2009 3:51PM
You mean to tell me the success of the program and Obama's presidency is at the mercy of a bunch of fucking bond traders?
Shit, how could this never have happened before?
Posted by guest , Mar 25, 2009 3:53PM
10 Don't wait too long on GLD, if these auctions are any idication it won't be long before a stack of Benjamins can't buy a box of toothpicks.
Posted by guest , Mar 25, 2009 4:03PM
@ 13 - until Mao-bama outlaws bond trading
Posted by Ben_H , Mar 25, 2009 4:07PM
@11 levered ETF rehedging means that you have a position in serial correlation. High vol and high mean-reversion and you'll be screwed.
Posted by Novice , Mar 25, 2009 4:10PM
@ cluzo, ben: obrigado
Posted by guest , Mar 25, 2009 4:35PM
muleskinner....show some love to the 762X39.
Posted by guest , Mar 25, 2009 4:39PM
Simple math $10trln budget deficit coming versus the Fed buying up to $300bln USTs
...also swervin Mervyn yesterday called into question how much additional QE there will be given the recent success the UK has had in driving down rates...ooops
USTs traders are for the most part snot-nosed kids sitting in franchise seats brokering flows....interest rate risk for the street is long gone away - talk to Pension Funds & HFs for any statement on risk...not the street
Posted by guest , Mar 25, 2009 8:58PM
@19
Yep, just amateurs here
Posted by guest , Mar 25, 2009 9:01PM
They are looking to take in extra to price in the uncertainties that DC is leaving us. The Gilt failed because it was gov't intervention would not be propping up the auction.
Posted by guest , Mar 26, 2009 8:47AM
And maybe if Wall St. wants to play games (ya know, the same kind that has the taxpayers bailing their sorry asses out), the public will be notified and the masses will pay a visit to Wall St.
Look how fast AIG straightened up.
People are pissed at you. I wouldn't push it.
Posted by guest , Mar 26, 2009 4:20PM
18 I'm still partial to 762x51.
~the Muleskinner~
Posted by guest , Mar 26, 2009 4:21PM
18 I'm still partial to 762x51.
~the Muleskinner~
Posted by guest , Mar 27, 2009 12:58AM
@ 22 there going to make people buy US Treasury securities now by passing a law mandating it?
Should we all be out buying Brown Shirts or do you have that covered as well?
Posted by guest , Mar 27, 2009 1:01AM
PS AIG straightened up, but they're not flying right.