A thread actually worth reading

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Apr 18, 2005
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#1
The moment many of us have been waiting and preparing for happened last week – it happened quietly but surely. Are you prepared for the Real SHTF events coming; now that last week’s event happened?

What was that event, you ask?

Well the Fed had the largest bond/T-bill auction last week. Which as you know that is the U.S. debt that is put up for auction for investors and countries to buy. Of course China has always been right there, staying behind the U.S. and purchasing our debt. There have been threads I and others have done about China being worried about the U.S. debt, besides wanting to attach inflation to the dollar.

When the first two auctions happened – I was searching everything I could about them.
I found this article right after them:

link - http://market-ticker.denninger.net/archives/1267-US-5yr-Bond-Auction-Effectively-FAILS.html



And here's the math:
1.923 BTC X 61.59% Primary Dealer bid = 1.18 BTC (PD), greater than 1.0. Or to put it a different way, but for the primary dealers the bid-to-cover was less than one, meaning that some of the issue would have been left on the table.
Thats a fail; but for the primary dealers the issue would not have subscribed.
Primary dealers are required to bid. That's the deal in exchange for their being named as "primary dealers." For this reason short of thermonuclear war you will never see an actual (BTC < 1.0) "fail" on a US Treasury Auction - Treasury has rigged the process so as to insure that cannot be reported.

Therefore, the question is this: Less the primary dealer "bid" (forced by agreement) was there sufficient interest to subscribe the issue, and the answer is NO.

Those who think this is "no big deal" need to have their head examined. In general any BTC under 2.0 indicates a serious problem, and the perverse nature of the primary dealer system is the reason.

The United States' Credit Card (issued by China and Japan) is being slowly cut off. That the stock market "recovered" after this ridiculously bad auction (bow-wow is the best way to describe it) speaks to the vacuum between the ears of both the cheerleaders in the mainstream media and those in the equity markets.

There is only one other time in recent memory that we've had a bond market auction fail like this. You might want to go have a look at your charts - with dates - for what followed shortly thereafter.

They're going to try to sell 7yrs tomorrow, and then the real fun begins with the quarterly refunding. That ought to be a real riot.


The next day – I began searching for the results of the 7 year bond sale.WOW – amazing, you would never guess what I found…… the 7 year auction went Fabulous!

My first thought was B.S!!!! There is NO way that a 7 year Fed bond auction would go better than the 5 year! I decided to keep hunting on WHO purchased those 7 year bonds, because to me – it did not smell right!

Link to 7 year bond auction info:
http://www.forbes.com/feeds/afx/2009/07/30/afx6721827.html

Oh please notice the place a PTB company is the one who released how well it went.


NEW YORK, July 30 (Reuters) - Though the stellar seven-year auction creates a positive tone ahead of the refunding, anxieties created by unimpressive two- and five-year auctions this week will linger as long as the market sees a growing load of debt headed its way.

At Thursday's auction, seven-year demand overall was above average, measured by the bid-to-cover ratio of 2.63. A gauge of foreign and institutional investor interest, the indirect bidder category, was stellar at more than 62 percent.
In another sign of strength in the auction, yields were below expectations, gauged by trading in the when-issued market. In contrast, two- and five-year auction yields came in above market expectations, which is known as a 'tail.'

'Overall it was a pretty good operation. There seems to be a lot of appetite, given where yields are, for notes in the belly.'

The two-year sale was lackluster and the five-year auction went downright poorly before the seven-year marked a recovery.


Notice this month will bring the 10 and 30 years bond sales.

Once I read how well the 7 year went, I thought “sure it did, the Fed lined up their cronies to purchase the debt”. I also thought “ the Fed is probably the one buying the debt themselves”.

I wanted to find out more, because the Fed, would need to cover up the fact NO ONE has confidence in the U.S or the dollar anymore. Also, I wanted to know if China purchased bonds.

So, yep…. More research was needed. Guess what I found?
 
Apr 18, 2005
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#2
A nice little article from the Wall Street Journal. The link is through GATA &#8211; because otherwise you need to have an account with the WSJ to read the article.
http://www.gata.org/node/7644

Shaky auctions of Treasury notes this week reignited concerns about whether the government can attract buyers from China and elsewhere to soak up trillions in new debt.

A fuse was lit this week when traders noted China's apparent absence from direct participation in two Treasury bond auctions. While China may have bought Treasurys just before the auctions, market participants read the country's actions as a worrying sign that China and other foreign investors may be ratcheting back purchases at a time when the U.S. is seeking to fund a $1.8 trillion budget deficit.

This week alone, the U.S. deluged the bond market with more than $200 billion in record-size sales. The U.S. has had little trouble finding buyers in recent months. But that demand is fading, and the Treasury market has become volatile.

Tension on Wall Street trading desks began building late last week when the Treasury surprised the market with plans for a record week of sales. A Monday sale of $90 billion in Treasury bills with maturities of as much as a year went well. But China appeared absent from the following two sales, which totaled $81 billion of debt, traders say.

By Thursday morning, trading-desk heads were frantically working with clients to ensure a better fate for the $28 billion seven-year note auction. It did fare far better, allaying some concerns.

"We believe by maintaining the deepest, most liquid market in the world, we will continue to attract capital from a broad array of investors," said Andrew Williams, a spokesman for the Treasury Department.

Details about the auctions aren't revealed by the government until weeks later. Overseas buyers initially are lumped together into a category known as "indirect bidders," giving little insight into the origins of demand. It may be months until more thorough data on foreign-government buying are released by the U.S. Treasury. Foreign investors had been substantial bidders in recent Treasury auctions, even though their holdings of Treasury debt had started to wane. But this week's auctions renewed worries that central banks and other buyers will start selling more aggressively.

"If this trend continues, it could reflect foreign buyers' increasing concerns about the creditworthiness of the U.S.," said James Bianco, president of Bianco Research.

While no one at State Administration of Foreign Exchange, which manages China's $2 trillion, would comment on the latest Treasury auctions, the government has left little doubt it fears the portfolio is at risk.

Clipped comments from government officials, amplified by state media editorials, point to a worry the U.S. will ultimately address its massive debt obligations by permitting inflation to rise or letting the U.S. dollar sink &#8211;- factors that would erode the value of Treasurys owned by foreign investors such as China.

At economic talks in Washington this week, senior Chinese officials gave their Obama administration counterparts an earful about the burgeoning U.S. budget deficit. China made clear it wants the U.S. to "protect its investment assets" for the good of the bilateral relationship, as the state-run Xinhua news agency reported.

If you read between the lines above, you will see the WSJ is even hinting and questioning who exactly purchased the bonds, if China did not. Plus did you read the part of the scrambling around by the Treasury Dept, before the 7 year bond auction?

In other words &#8211; the govt. won&#8217;t reveal who purchased the bonds &#8211; the buyers will be lumped together &#8211; but did you notice the MOST IMPORTANT INFO? CHINA WAS ABSENT for the bond sales, except for the One year ones!

This was the moment many have been preparing for, when no other country will buy our debt anymore &#8211; there is no longer confidence in the U.S. dollar. Also imagine what is going to happen with the longer bonds coming up this month. Oh, I am sure the Fed will print up the money to buy the debt though &#8211; they will most likely do it through Goldman Sachs, J.P. Morgan and companies such as that.

The above is actually Very Important information &#8211; the SHTF event happened regarding T-bills, in reality &#8211; buyers are scarce.

Also &#8211; on Friday the dollar index went to the lowest this year &#8211; it fell almost a full point on Friday &#8211; that means &#8211; other countries know the truth of what is happening. BTW: did you notice what gold and silver did Friday?

 
Apr 18, 2005
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#6
^the purchasers purchase the debt off the hands of the fed. basically so the fed doesnt have it upon their hands when the dollar's doomsday arrives. what's puzzling is the fact that china only bought out the 1 year bonds rather then the 5 or 7 year bonds which we all know china has been buying our debt for quite some time now. they say they wont report who bought these bonds (our new slaveowners) until weeks, or even MONTHS after the auction to reveal the names of investors & corporate businesses thats buyin' the debt. we stay being fooled.