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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (4540)	1/7/2004 2:25:17 PM
From: russwinter	Respond to of 110194

$6.42 Billion, indicated as direct bids here. "The Bank of Japan was thought to have bought an astonishing $28 billion in just the first two days of this week in an attempt to support the yen." Explains the big "bond rally" quite clearly. This is BS, unless meant as a criticism?: "Two hundred billion dollar Treasury purchases from the Fed would have been widely viewed as a massive distortion. But foreign central banks doing exactly the same thing is quietly sanctioned and encouraged by U.S. policy-makers," he added." The auction was for a five year, not ten year as I posted earlier. The TIPS bond tomorrow may be more illustrative, as it's more of a "PIMCO type" domestic issue, rather than forced false Old Maid card demand from the BOJ. Reuters Treasuries Gain as Auction Has Strong Bid Wednesday January 7, 1:59 pm ET By Ellen Freilich NEW YORK (Reuters) - Treasuries edged higher on Wednesday on news that the Treasury's five-year note auction, the first major auction of U.S. government debt this year, attracted strong demand, including from foreign central banks. Indirect bidders, which mainly comprise foreign central banks, picked up 40 percent of the issue, beating last month's 34.6 percent. The sale of $16 billion in new five-year Treasury notes went at a yield of 3.26 percent and drew bids for a hefty 2.50 times the amount on offer, way above the 2.09 average of last year's sales. "A bid-to-cover ratio of 2.51 reflects strong demand," said Josh Stiles, senior bond strategist at IDEAglobal. But he said the market was most interested in the large percentage of indirect bids involved in the auction. The Treasury Department said bids from primary dealers took $9.43 billion of the $16.0 billion auction, while indirect bids took $6.42 billion, or 40 percent. In contrast, in the seven previous auctions for which the Treasury released data, indirect bids, on average, accounted for 31.6 percent of the bids accepted. In December's auction, indirect bidding accounted for nearly 35 percent of the bids accepted. Dealers believe offshore central banks account for much of the indirect bidding as they spend some of the dollars they have been amassing in recent days. The Bank of Japan was thought to have bought an astonishing $28 billion in just the first two days of this week in an attempt to support the yen. Much of this money is thought to end up in Treasuries, an understandable assumption given that foreign central bank holdings of Treasury and agency debt ballooned by $224 billion last year to a record $1.07 trillion, and by $91 billion last quarter alone. Alan Ruskin, chief economist at 4CAST, noted that is equivalent to financing 79 percent of the Treasury's entire net borrowing needs in the fourth quarter. "No wonder the Treasury market is so resilient to the influx of exceptionally strong data and the scale of supply," Ruskin said. He said central banks like the BOJ were doing the Federal Reserve, and the White House for that matter, a big favor by holding Treasury yields down. "Two hundred billion dollar Treasury purchases from the Fed would have been widely viewed as a massive distortion. But foreign central banks doing exactly the same thing is quietly sanctioned and encouraged by U.S. policy-makers," he added. Such optimism helped the current five-year note (US5YT=RR) erase early losses and push ahead 5/32 in price, nudging yields down to 3.21 percent from 3.24 percent late on Tuesday. The new notes were yielding 3.25 percent in when-issued trade. In late morning trade, before the auction bidding deadline, they yielded 3.27 percent.