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

To: russwinter who wrote (21349)	11/4/2004 5:31:45 PM
From: Amark$p	Respond to of 110194

here is the results of the prior 10 year (non TIP) auction in September (Oct 10 year was a TIP): Posted by: amarksp In reply to: huesos who wrote msg# 10887 Date:9/10/2004 11:35:00 PM Post #of 11921 Sudden drop in US bond demand By Jennifer Hughes in New York Published: September 10 2004 03:00 / Last updated: September 10 2004 03:00 A Treasury auction of US government bonds yesterday attracted almost no private demand, creating confusion in the bond markets following a sale on Wednesday that had pulled in unprecedented private appetite. Bond prices fell in the market after the Treasury revealed yesterday that indirect bidders, who include foreign central banks and other official institutions, took only 2.9 per cent of the bonds on offer compared with an average of about 32 per cent at the previous 10 auctions. The sale, of $9bn in 10-year paper, was largely bought up by primary dealers - banks who are licensed to deal directly with the Federal Reserve and in return have to underwrite the auction. Usually primary dealers buy about one-third for their own account but the lack of appetite yesterday meant they took 96 per cent. The bonds on offer were a regular re-opening, or repeat, of bonds offered last month. "Indirect bidding is sometimes lower on a re-opening but its hard to explain this," said Rick Klingman, head of US Treasury trading at ABN Amro. The previous record low for indirect bids was 19.9 per cent. Yesterday's surprise collapse in demand added to a sense of unease following unprecedented levels of direct buying in a $15bn auction of five-year notes the day before. Bidders who deal direct with the Treasury usually only amount to about 1 per cent of any auction but on Wednesday, unknown parties took about one-third of the bonds on offer instead of going through the banks, prompting fears that Wall Street could be losing its grip on the market. "These auctions are confusing for the street," said Kim Rupert, analyst at ActionEconomics, who said participants were worried about the potential impact of more rollercoaster auctions like these. "If these upsets do become a trend, I suspect we'll see sloppier auctions in future, maybe to the detriment of the Treasury's debt programme," she added. The weak demand at yesterday's auction forced the coupon on the new paper to 4.19 per cent, higher than expected. In late trading yesterday, yields on 10-year bonds had risen to 4.19 per cent to match the coupon from 4.16 per cent ahead of the sale, pushing bond prices lower. "These auctions are making it tough on dealers," said Gerald Lucas, chief Treasury strategist at Banc of America Securities. "Primary dealers who have come out long [of 10-year Treasuries] after buying at the auction are now seeing their positions under water."http://news.ft.com/cms/s/e3717ce4-02cb-11d9-a968-00000e2511c8.html