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]