Today's US Treasury 30 Year Auction

Well, it is year end.

But there is undeniably a strong move to the short end of the curve, especially by the big debt buyers like foreign central banks who prefer their maturities in the 3 to 5 year range or less, sans agences s'il vous plait. This was also seen in yesterday's Ten Year Auction.

As for domestic buyers, the yield curve preference is less an investment decision than an IQ test. Only Zimbabwe Ben and the Last Resort Boys, along with a few pension and insurance funds who are compelled by a government mandate to match duration of obligations, are buying the long end ten years and out.

There was nothing in Treasury Secretary Geithner's appearance before the cameras today to compel one to do anything but hide in short durations, preferably offshore. Mr. Secretary engaged in a battle of wits with Elizabeth Warren, with Le Crampe de Cervau coming out a bit on the short end himself as he attempted to justify the bailout of AIG at par.

As you may recall, Liz Warren is a prof at Harvard with a portfolio in the field of financial liquidations, and Tim's rhetorical wind was met with a blazing fire of informed incredulity. No Congressperson or money honey she.

When the time comes the longer duration will be an excellent buy again, but not until Fed Funds is around 20% or so. What is that, about 2,000 basis points to go? I'll make a note.

Maybe there will be a protracted monetary deflation and a stronger dollar to justify those four and a half percents of return over 30 years. And maybe Timmy will get a job NOT working for Wall Street or the Fed when he passes out of the Obamasphere next year, in favor of a seasoned financial consigliere more conversant with the management of a currency crisis. It is hard to just throw money at them.


Bonds down after poorly bid 30-year auction
By Burton Frierson

NEW YORK, Dec 10 (Reuters) - U.S. Treasury debt prices fell on Thursday, sending 30-year yields to four-month highs after a poorly bid long-bond auction rekindled worries over the huge federal budget deficit.

The government sold $13 billion of 30-year bonds in an auction that was weak on all measures and suffered from its year-end timing, when many financial market professionals are reluctant to commit funds for such long-term investments.

However, the gaping U.S. budget deficit will outlast the seasonal factors and some analysts worried that the sloppy long bond auction was a sign of tough times to come for a government that has tried to borrow its way out of a credit crisis.

"It was pretty ugly. The old lump of coal in the stocking," Kim Rupert, managing director of global fixed income analysis at Action Economics LLC in San Francisco.

"It is just going to be a difficult year ahead fiscally and with respect to monetary policy and also the markets. I think Today's 30-year auction could just be the harbinger."

The 30-year long bond US30YT=RR fell rapidly after the auction, pushing yields up as far as 4.51 percent, their highest since August.

They were last down 30/32, yielding 4.48 percent versus Wednesday's close of 4.42 percent.

The benchmark 10-year note fell 8/32, yielding 3.47 percent, versus Wednesday's close of 3.44. During the selloff, benchmark yields rose to a four-week high of 3.52 percent.

However, the market recovered from its worst levels as both 4.50 percent 30-year yields and 3.50 percent 10-year rates have been seen as attractive levels by some investors to get into bonds.

The 30-year auction ended this week's three offerings totaling $74 billion. Though that's below the weekly record of $123 billion set in October, it is a lot of debt to sell in a traditionally quiet time of the year....