Auction to sell the government debt had "disappointing" demand, causes DOW to drop from +200 to -100

[originalpckelly]

NEW YORK (Dow Jones)--A fresh round of selling hit Treasurys Wednesday after a record $34 billion five-year note auction enticed lukewarm demand.

Bonds were already down before the auction following a failed 40-year U.K. government debt sale, the first failed auction of conventional U.K. government bonds since 1995. Rising stocks, and an unexpected rise in U.S. durable goods also weighed on bond prices.

***SNIP***

"It was a terrible auction," said Charles Comiskey, head of U.S. government bond trading in New York at HSBC Securities USA Inc. "It called into question government bond auctions going forward."

While the Federal Reserve's bond buying program will temper a rise in bond yields over the next few months, Comiskey said in the short term, bonds will suffer due to technical selling. The fact that the Fed is intervening to push yields down to artificially low levels may turn some buyers away, he said.

http://online.wsj.com/article/BT-CO-20090325-712038.html

It means they're offering the bonds at too high a price, and the people buying them want a bigger discount. The price of the government issuing debt is going to have to increase, which means there is more interest on the debt. This is really not a good thing.

"The indirect bid - demand from domestic and foreign institutions, including foreign central banks - for Treasury's $34 billion five-year note auction was 30%, compared to 48.9% from the previous auction in February and the average of 30.1% for the last 10 auctions."

That's definitely not good, because that means fewer people from foreign countries wanted the debt, and if you recall, that's how we finance a lot of it.

[originalpckelly]

1. So basically, what this means...

is that it's going to cost more for the government to buy money, and the Fed can't buy all the debt up. It's important to monitor this, because the idiots making economic policy are trying to sweep this bubble under the government rug, and the only limit of the government rug is its ability to borrow. When the ability of the government to borrow cheaply is decreased, the bubble will finally collapse. This shit is not good. They swept the bubble from tech under the financial industry, and now they're sweeping it under the government.

[originalpckelly]

2. The DOW retreated from a 200 point gain to a 100 loss on this...

so it's a big swing.

[slipslidingaway]

3. K&R....

Fun With Funding...THE critical issue looking ahead is COST OF FUNDING

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=4053996&mesg_id=4053996

[originalpckelly]

4. This is all heading toward the US not being able to get enough money...

to pay for all these programs to prop up the economy. Either that, or the expense will be so high it will be unfeasible, and we'll end up defaulting for lack of funds to pay.

I wonder if the treasury has a web page telling people how much money they have to pay the debt holders. That page/statistic number would be an important metric to watch as the government bubble busts.

[slipslidingaway]

6. Maybe today is a shot across the bow ...

"I wonder if the treasury has a web page telling people how much money they have to pay the debt holders. That page/statistic number would be an important metric to watch as the government bubble busts."

:)


Treasury Market and Mortgage Rates
http://mortgage-x.com/general/treasury.asp

[aquart]

5. They were surprised? Good freaking grief.