Even after raising the 5yr bond rate to 2.83% (very high!) yesterday’s bond auction showed once again no one is buying US debt. Instead it’s a shell game where the FED buys its own issued debt through indirect buyers. Buyers of buyers of buyers, a convoluted maze that makes it hard to see what’s really going on. But in the end, it’s a banana republic. Because our 21T debt is unsustainable, there simply are not enough buyers in the world. And the Saudis and Chinese are no longer carrying their share, only Japan keeps gobbling up. So there simply is not a world debt demand for such huge amounts and even great rates of return have not helped.
So the FED yet again, will drive interest rates up, crush the economy, and make buying a house near impossible. While granted a 30yr rate of 5 or 6% return makes sense, we simply are hiking too fast and cannnot adjust. WE are going about three times faster than the economy can absorb, so it’s like a bucket challenge – icey water on our veins to stop the growing economy. It’s bad. really bad. Because there’s no way out except to cut the lavish welfare lifestyles for the fakely disabled low iq dysgenic peoples who have taken over the USA. Those payouts need to get cut AT LEAST IN HALF and return them back to real poverty if they chose not to work. The dems wont have their slaves unfed so they are wrecking things for everybody.
Similar to yesterday’s sale of 2Y paper, moments ago the Treasury sold $39 billion in 5Y paper at a high yield of 2.977%, below last month’s 2.997%, and tailing the When Issued 2.971% by 0.6 bps.
The bid to cover dropped from 2.39 in September to just 2.30, below the 6 auction average of 2.51 and the lowest since February 2017.
But it was the internals were the biggest similarity to yesterday’s auction was found, because for the second day in a row, Direct Bidders were engaged in a full blown boycott, tendering only $2.227BN in bids, and were hit on only $727MM, a take down of only 1.9%, which was the lowest since July 2009. It is unclear what has spooked Direct bidders so much but whatever it is, it continues.
Meanwhile, Indirects took down 59.0% of the auction, which while above last month’s 57.9% was below the six auction average of 61.6%. Dealers were left with 39.1% of the allotment, a sharp increase from the 28.3% recorded in the prior 6 auctions.
Overall, not a bad auction but the collapse in Direct demand is perplexing and if it continues, may be an indication that a key buyer group for Treasury paper may have left the building.