There was a moment of panic in markets today ( with EUR/USD down 50 pips, gold down 30 and Dow jones down 150 in minutes ) when US 30 year bond auction result came out. I have attached bloomberg chart for reference
After the stellar, record-sized 3Y and 10Y auctions earlier this week, moments ago the Treasury concluded refunding week with another record auction, this time in the form of an all time high $26BN in 30Y bonds.
However besides the record auction size, today’s 30Y sale had nothing in common with this week’s prior coupon auctions both of which passed with flying colors, as this was without doubt the ugliest 30Y auction in years.
Pricing at a high yield of 1.406%, this was a 2.4bps tail to the 1.382 When Issued – the biggest tail since last July – and well above last month’s 1.357%.
The other metrics were far worse, however, with the Bid to Cover plunging from 2.50 to just 2.136, the lowest since July 2019 and one of the lowest on record.
The internals were even uglier, with Indirects plunging from 72% to 59.8%, the lowest since November and well below the 66.2% six-auction average. And with Directs taking down just 11.9%, it left Dealers holding a whopping 28.3% of the sale, the most since July 2019.
I believe that investors have started asking for a higher premium to invest in long term US treasuries and today was just a glimpse.
If US treasuries gives market related yields at auction then the yields will blow out
If US treasuries does not want to give higher cutoff yield then Fed will have to buy the bonds by capping the yield curve and Dollar will tank
We are nearing the moment of truth because if Fed does not come to rescue all markets except US dollar will have a meltdown together