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Wednesday, July 6, 2011
History Made Today: US Treasury Issues 0.000% 4-week Bills
U.S. Treasury auction results here. I do not believe this has ever been done before in the history of the U.S. Treasury.
JKH, OK you got me with the 4th decimal place! Doh! ;)
btw, what do you think of Gross here? These seem (to me anyway) as very reckless comments on his Twitter, for someone with his position... He is really putting himself out on a limb so to speak. Maybe subliminally he knows the 30 year ride down to zero rates is over and doesnt know how to handle it...
Would you agree that one could reasonably conclude he is exhibiting ignorance of how the US Treasury system of Primary Dealers works? This is disturbing for the head of PIMCO... I would expect it from Jimmy Rogers types, but not even Rogers has been so reckless with his statements... maybe Rogers doesnt Twitter yet..
OTOH, I wonder if he has outsourced his Twitter PR channel to an outside PR firm that is getting carried away? And Gross is not really the one putting this out?
It looks like he has dropped offline for now... it will be interesting to see how he re-surfaces...
He's made himself $ 2 billion, Matt, so he's done a few things right along the way. But I don't find him so interesting to listen to, and certainly not to read. Paul McCulley was the guy worth paying attention to, but he's gone. Gross doesn’t have the understanding of the monetary system that McCulley did. And I have to think McCulley would have been loath to short treasuries on Gross’s latest reasoning.
Do you guys have any thoughts on this? http://online.wsj.com/article/SB10001424052702303982504576426300373032950.html?mod=ITP_moneyandinvesting_0
Mosler posted an email by Glenn Hadden a couple months ago when S&P downgraded the US, in which he pretty much recited MMT. Mosler said he is on his mailing list. Seems unfortunate this secret MMTer lost this high-profile bet.
Perhaps MS didnt realize that QE2 raised interest rates. With the Fed in there, they were acting as a scale down buyer into a speculative sell-off across the board in bonds by the inflationistas....
Now would probably be a better time to go long the bonds if you could get a commitment from the Fed that they in no way will get involved in QE again....
This from Mike during the QE2: "The Fed is buying "scale down" and in effect, causing the selloff. They're doing this because they're fixated on quantity ($600 bln) as opposed to price (interest rate). I remember when I was a floor trader. I had clients in the oil business--big firms--who would sometimes want to protect a certain price. They'd give me an order that would be, "Buy 100 (crude), 'worst.'" That meant buy it up...aggressively. When Japan used to actively intervene in FX markets, they wouldn't scale down their dollar buying (or sell yen scale up), they'd buy dollars aggressively to put the USD/JPY exchange rate to a certain level. The Fed is not doing this. By signaling to the market that they will buy scale down, they are actually creating this selloff as nervous longs look to sell before the largest buyer lowers its bid again and as speculative shorts compete for a better price."
Steve Briese has written that in these circumstances a bottom usually doesnt form until this large "commercial" scale down buyer (in this case the Fed) finally stops buying, which seems to be now (end June). So I am watching for bonds to start to rise from here, like yesterday the 4-weeks went at 0%, this buying interest should transition right out the curve.
But the Fed is still a wildcard. They could start a rumor today of a QE3 and here we go again.... they have unlimited funds...
If you check out Beowulfs links in my previous post on the 6 month issues it may explain the nuts and bolts of the auction process in detail...
I think the 'tendered' means that that is the amount that buyers put up in total at various prices, but not all got "filled".
Those that were willing to accept the lowest interest rate/pay the highest amount for the bills got filled until the Treasury ran out of bills to sell for the day at 31B.
So buyers showed up with over 100B but only 31B got filled who bid the highest/accepted lowest interest.
Matt,
ReplyDeleteThe high, median, and low prices were all the same rate to 3 decimals.
But the high took only 89 per cent of the auction.
Maybe Bill Gross scooped a bunch at a low of .0004 per cent.
:)
JKH,
ReplyDeleteOK you got me with the 4th decimal place! Doh! ;)
btw, what do you think of Gross here? These seem (to me anyway) as very reckless comments on his Twitter, for someone with his position... He is really putting himself out on a limb so to speak. Maybe subliminally he knows the 30 year ride down to zero rates is over and doesnt know how to handle it...
Would you agree that one could reasonably conclude he is exhibiting ignorance of how the US Treasury system of Primary Dealers works? This is disturbing for the head of PIMCO... I would expect it from Jimmy Rogers types, but not even Rogers has been so reckless with his statements... maybe Rogers doesnt Twitter yet..
OTOH, I wonder if he has outsourced his Twitter PR channel to an outside PR firm that is getting carried away? And Gross is not really the one putting this out?
It looks like he has dropped offline for now... it will be interesting to see how he re-surfaces...
Be well! Resp,
He's made himself $ 2 billion, Matt, so he's done a few things right along the way. But I don't find him so interesting to listen to, and certainly not to read. Paul McCulley was the guy worth paying attention to, but he's gone. Gross doesn’t have the understanding of the monetary system that McCulley did. And I have to think McCulley would have been loath to short treasuries on Gross’s latest reasoning.
ReplyDeleteDo you guys have any thoughts on this? http://online.wsj.com/article/SB10001424052702303982504576426300373032950.html?mod=ITP_moneyandinvesting_0
ReplyDeleteMosler posted an email by Glenn Hadden a couple months ago when S&P downgraded the US, in which he pretty much recited MMT. Mosler said he is on his mailing list. Seems unfortunate this secret MMTer lost this high-profile bet.
wh,
ReplyDeletecant get thru the paywall... perhaps you can post the key excerpts...
Resp,
Found it at ZH.
ReplyDeletePerhaps MS didnt realize that QE2 raised interest rates. With the Fed in there, they were acting as a scale down buyer into a speculative sell-off across the board in bonds by the inflationistas....
Now would probably be a better time to go long the bonds if you could get a commitment from the Fed that they in no way will get involved in QE again....
This from Mike during the QE2: "The Fed is buying "scale down" and in effect, causing the selloff. They're doing this because they're fixated on quantity ($600 bln) as opposed to price (interest rate). I remember when I was a floor trader. I had clients in the oil business--big firms--who would sometimes want to protect a certain price. They'd give me an order that would be, "Buy 100 (crude), 'worst.'" That meant buy it up...aggressively. When Japan used to actively intervene in FX markets, they wouldn't scale down their dollar buying (or sell yen scale up), they'd buy dollars aggressively to put the USD/JPY exchange rate to a certain level. The Fed is not doing this. By signaling to the market that they will buy scale down, they are actually creating this selloff as nervous longs look to sell before the largest buyer lowers its bid again and as speculative shorts compete for a better price."
Steve Briese has written that in these circumstances a bottom usually doesnt form until this large "commercial" scale down buyer (in this case the Fed) finally stops buying, which seems to be now (end June). So I am watching for bonds to start to rise from here, like yesterday the 4-weeks went at 0%, this buying interest should transition right out the curve.
But the Fed is still a wildcard. They could start a rumor today of a QE3 and here we go again.... they have unlimited funds...
Resp,
You made DeLong's, Matt.
ReplyDeletehttp://delong.typepad.com/sdj/2011/07/these-are-the-days-of-miracle-and-wonder.html
I admit, I am not exactly able to read this yet.
ReplyDeleteWhat does "tendered" mean versus "accepted"?
And what is a high rate, low rate, etc?
Sorry for such obvious questions...any help would be appreciated.
Cheers!
Mario,
ReplyDeleteIf you check out Beowulfs links in my previous post on the 6 month issues it may explain the nuts and bolts of the auction process in detail...
I think the 'tendered' means that that is the amount that buyers put up in total at various prices, but not all got "filled".
Those that were willing to accept the lowest interest rate/pay the highest amount for the bills got filled until the Treasury ran out of bills to sell for the day at 31B.
So buyers showed up with over 100B but only 31B got filled who bid the highest/accepted lowest interest.
Its more complicated but sort of same result...
Resp,