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Thread: 30 year bond auction: surprise coming?

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    Default 30 year bond auction: surprise coming?

    http://market-ticker.org/archives/11...ts-Beware.html

    "The auction results make absolutely no sense under "conventional wisdom."

    Median yield down, primary dealers took about half and indirect bidders took the other half, basically.

    What? 50% take for foreign central banks on 30y debt at a 4.6ish coupon?

    That makes no sense given what we're being told is coming: massive inflation, maybe even hyperinflation, commodities ramping to the moon, the stock market going to the moon in a hyper-inflationary printing explosion.

    The stock market rocketed on the release. I couldn't make sense out of the initial FX moves, especially in the DX and Yen. Someone was front-running in the financials bigtime as well, with a big ramp for an hour or so prior to the results.

    Folks, if you think hyperinflation is coming, or even serious inflation, you're going to get your head cut off on a 4.6% 30y bond. In fact you could easily lose half or more of your investment, should you need to sell, and your coupon will be half or less of what it should be.

    So how does this make any sense?

    There is only one reason for the FCBs to want this sort of exposure:

    They expect a ramp in the dollar and crushing DEFLATION, as this is the only way that bet will pay off.

    If you're on the other side of this trade in any way, I hope you are putting on some sort of hedge.

    Remember, foreign central banks can FORCE a pull in liquidity and make their desires a self-fulfilling prophecy.

    Care to bet against someone who can make their bet pay off?

    That's what I thought.....

    Oh guess what - the primary dealers would like this outcome too......

    PS: If this analysis is correct then we're in for some really NASTY trouble, quite soon. If you're short Ts, short dollars or long equities, your neck is in the guillotine. Better move before the blade falls!"

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    Default Re: 30 year bond auction: surprise coming?

    ... wash, rinse, spin, repeat !!!

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    Default Re: 30 year bond auction: surprise coming?

    Long term currency positions are hell scary for this reason. You're playing against the house, who can also rig the deck
    Once again, the conservative, sandwich-heavy portfolio pays off for the hungry investor
    - Dr John Zoidberg

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    Default Re: 30 year bond auction: surprise coming?

    Remember, foreign central banks can FORCE a pull in liquidity and make their desires a self-fulfilling prophecy.

    You're playing against the house, who can also rig the deck

    ... which brings to mind and old axiom """ the market can remain irrational longer than you can remain solvent """ !!!

    Also, the tin foil hat crowd has a number of opinions which, with conspiratorial details omitted, essentially boils down to a conclusion that Cayman Islands 'private' hedge funds SEEM to have so many US dollars available for US Treasury bond purchases at convenient moments that it's almost as if they had access to a US dollar printing press !!!

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    Default Re: 30 year bond auction: surprise coming?

    ^^^ also, now that official data has become available, it's possible to make some sense out of these recent treasury auction results





    ... in a nutshell, more than 50% of this entire T-bond auction's bids were matched by equivalent Federal Reserve Open Market T-Bond purchases ... 11 billion dollar's worth ! So arguably foreign banks were NOT the major financial force at work here, it was in fact the US FED making up for the lack of foreign buyer interest (with freshly printed US dollars) !

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    Default Re: 30 year bond auction: surprise coming?

    but the author of the above mentioned article is in the deflation camp:

    http://zerohedge.blogspot.com/2009/0...perations.html

    "Inflationists, will, of course, read into this as an inflationary sign and buy every barrel of oil they can find while screaming bloody inflation as CNBC reverberates it to the moon and back since it jives with exactly what the Administration is hoping: that Joe Sixpack goes out and maxes his credit card just like in the good old days. But the last is not and will not be happening... So the conundrum continues."

    what I don't understand is how can all this new printed money NOT cause inflation? Will there be a certain signal that will show us that the deflation is over? Home prices are still going up, and unemployment is still on the rise.

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    Default Re: 30 year bond auction: surprise coming?

    what I don't understand is how can all this new printed money NOT cause inflation? Will there be a certain signal that will show us that the deflation is over? Home prices are still going up, and unemployment is still on the rise.
    I assume you meant that home prices are still going DOWN not up.

    To answer your first question, money is both 'created' ( by fed printing ) and destroyed ( by officially written-off losses ). It is the balance between the two which determines the inflation / deflation result. And there is also a new wrinkle, in that the creation of more 'debt' had been treated as the equivalent of the creation of more money. This truism is now beginning to fall apart as global investors begin to worry about politically sanctioned secured bondholder losses, America's credit rating deteriorating etc.

    To answer your inflation question, I see that both the US and the Eurozone are attempting to sue the Chinese gov't for 'hoarding' raw materials ! This is also a new wrinkle, as it appears that China has chosen to invest its mountain of foreign trade surplus US dollars into commodities / natural resources / energy purchased from the world market. Obviously this Chinese buying has been instrumental in running up US dollar denominated prices of oil / gold / copper etc. which constitutes a new factor in America's domestic price inflation 'formula'.

    Don't you love 'uncharted territory' !

    I would also point out that while ZeroHedge leans towards continued deflation in the shorter term, they find that massive inflation in the longer term is inevitable.

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