Treasury auction fail?

[c1ue]

Denninger saying that the 5 year Treasury auction on 7/29 was a virtual fail:

http://market-ticker.denninger.net/archives/1267-US-5yr-Bond-Auction-Effectively-FAILS.html


1.923 BTC X 61.59% Primary Dealer bid = 1.18 BTC (PD), greater than 1.0. Or to put it a different way, but for the primary dealers the bid-to-cover was less than one, meaning that some of the issue would have been left on the table.
Thats a fail; but for the primary dealers the issue would not have subscribed.
Primary dealers are required to bid. That's the deal in exchange for their being named as "primary dealers." For this reason short of thermonuclear war you will never see an actual (BTC < 1.0) "fail" on a US Treasury Auction - Treasury has rigged the process so as to insure that cannot be reported.


The 7 year auction on 7/30 was much better, but again the foreign and indirect bidder portion was very high.

Furthermore while this 7 year security is quite new, the actual interest rate in the first issue: 3/2/2009 is more than 0.5% lower than this latest one


CUSIP=912828KS8

Interest Rate:

2.625%

Security Term:

7-YEAR, 0-MONTH


<TABLE><TBODY><TR><TD class=lside>Security Type</TD><TD>NOTE</TD><TD> </TD><TD class=lside>First Interest Payment Date</TD><TD>08-31-2009</TD></TR><TR><TD class=lside>Series</TD><TD>G-2016</TD><TD> </TD><TD class=lside>Standard Interest Payment</TD><TD>13.125000</TD></TR><TR><TH> </TH><TH>Yield %</TH><TH>Price</TH><TH> </TH></TR><TR><TD class=lside>High</TD><TD>2.748</TD><TD>99.221940</TD><TD> </TD></TR><TR><TD class=lside>Avg/Median</TD><TD>2.670</TD><TD>0.000000</TD><TD> </TD></TR><TR><TD class=lside>Low</TD><TD>2.500</TD><TD>0.000000</TD><TD> </TD></TR></TBODY></TABLE>
<TABLE><TBODY><TR><TD class=lside>Allocation at the High</TD><TD>67.47%</TD><TD> </TD><TD> </TD><TD> </TD></TR><TR><TD class=lside>Offering Amt</TD><TD>22.0 billion</TD><TD> </TD><TD class=lside>Announce Date</TD><TD>02-19-2009</TD></TR><TR><TD class=lside>Auction Date</TD><TD>02-26-2009</TD><TD> </TD><TD class=lside>Issue Date</TD><TD>03-02-2009</TD></TR><TR><TD class=lside>Maturity Date</TD><TD>02-29-2016</TD><TD> </TD><TD class=lside>Original Issue Date</TD><TD>n/a</TD></TR><TR><TD class=lside>Auction Format</TD><TD>SINGLE PRICE</TD><TD> </TD><TD> </TD><TD> </TD></TR><TR><TD class=lside>Total Tendered</TD><TD>$47,492,300,600</TD><TD> </TD><TD class=lside>Total Accepted</TD><TD>$23,178,494,600</TD></TR></TBODY></TABLE>



CUSIP=912828LD0

Interest Rate:

3.25%

Security Term:

7-YEAR, 0-MONTH


<TABLE><TBODY><TR><TD class=lside>Security Type</TD><TD>NOTE</TD><TD> </TD><TD class=lside>First Interest Payment Date</TD><TD>01-31-2010</TD></TR><TR><TD class=lside>Series</TD><TD>M-2016</TD><TD> </TD><TD class=lside>Standard Interest Payment</TD><TD>16.250000</TD></TR><TR><TH> </TH><TH>Yield %</TH><TH>Price</TH><TH> </TH></TR><TR><TD class=lside>High</TD><TD>3.369</TD><TD>99.263422</TD><TD> </TD></TR><TR><TD class=lside>Avg/Median</TD><TD>3.287</TD><TD>0.000000</TD><TD> </TD></TR><TR><TD class=lside>Low</TD><TD>3.210</TD><TD>0.000000</TD><TD> </TD></TR></TBODY></TABLE>
<TABLE><TBODY><TR><TD class=lside>Allocation at the High</TD><TD>91.73%</TD><TD> </TD><TD> </TD><TD> </TD></TR><TR><TD class=lside>Offering Amt</TD><TD>28.0 billion</TD><TD> </TD><TD class=lside>Announce Date</TD><TD>07-23-2009</TD></TR><TR><TD class=lside>Auction Date</TD><TD>07-30-2009</TD><TD> </TD><TD class=lside>Issue Date</TD><TD>07-31-2009</TD></TR><TR><TD class=lside>Maturity Date</TD><TD>07-31-2016</TD><TD> </TD><TD class=lside>Original Issue Date</TD><TD>n/a</TD></TR><TR><TD class=lside>Auction Format</TD><TD>SINGLE PRICE</TD><TD> </TD><TD> </TD><TD> </TD></TR><TR><TD class=lside>Total Tendered</TD><TD>$74,287,499,400</TD><TD> </TD><TD class=lside>Total Accepted</TD><TD>$28,701,406,900</TD></TR></TBODY></TABLE>

[babbittd]

http://i26.tinypic.com/2czvn0h.png

[c1ue]

Saw a story as well where traders were saying China was notably absent from auctions last week. Story also noted that China may have bought before the auction.

Can't remember the link offhand.

[cobben]

Auction Results: Less Than Festive (http://acrossthecurve.com/?p=7422)

<SMALL>July 29th, 2009 1:53 pm | by John Jansen | </SMALL>
http://acrossthecurve.com/?p=7422

" . . .
The tail is an indicator of relative interest in the auctions and the 5 basis point tail on the 5 year note today was rather large. Unfortunately, I have no facility here to check history but I just spoke with a fellow who trades the belly and he suggests that it has been more than year since one has tailed that much.
And it is also troubling that it happened in concert with the sloppy 2 year note auction yesterday. Several participants have reported that the 2 basis point tail yesterday was the first tail on the 2 year note since December.
And if the Treasury had concocted a plan to obfuscate the meaning of the indirect bidding category to make it appear that there is more central bank interest than there really is, then that enterprise has been an abject failure as the indirect bidding interest has been parsimonious yesterday as well as today.
. . . "

Bond Market Close July 29 2009 (http://acrossthecurve.com/?p=7430)



http://acrossthecurve.com/?p=7430

" . . .
As the day progressed the focus of the market shifted to supply in the form of the Treasury auction of $ 39 billion 5 year notes. I wrote about it extensively earlier. The Readers Digest version is that the auction result was quite sloppy and the dealer community shot the taxpayers in the big toe with a 5 basis point tail.
. . .
Goldman Sachs ( purportedly a well connected and well informedand powerful bond firm domiciled in lower Manhattan) put out a piece today in which the firm called for higher bond yields.
They suggest that relative to other asset classes that the risk premium built into the Treasury market is too high and should decline to reflect less risky conditions. Here is a relevant excerpt:
* UST yields have room to rise. Financial conditions have eased
> significantly over the last month.
> * Risk premium on the UST curve is high relative to other asset
> classes. As a result, flatteners may be attractive.
> * The strong participation in June’s front-end auctions is likely not
> the start of a new trend.
I would humbly suggest that it is possible that the Treasury market has the correct story and the other markets are wrong.
The corporate bond market remains firm and there have been no significant changes since I posted on it earlier."