[copious.abundance]

The auction of $40 billion of 2-year Treasuries went real well today - was almost 3x oversold.

>>> Marketwatch <<<
$this->bbcode_second_pass_quote('', 'M')ay 26, 2009, 1:12 p.m. EST
Treasury sells $40 billion in 2-year notes at 0.94
By Deborah Levine

NEW YORK (MarketWatch) -- The Treasury Department sold $40 billion in 2-year notes on Tuesday to yield 0.940%, marking the first of three large note auctions this week totaling $101 billion. Bidders offered $2.94 for every dollar of debt being sold, compared to an average of $2.69 at the last four monthly sales. The class of investors that includes foreign central banks took 54.4% of the sale, the most since November 2006. The yield on the current 2-year note, which moves inversely to the price, pared an earlier increase to stand little changed at 0.89%

[Jotapay]

$this->bbcode_second_pass_quote('OilFinder2', 'T')he auction of $40 billion of 2-year Treasuries went real well today - was almost 3x oversold.

[copious.abundance]

I'm well-aware of that Jotapay. Which is why I said:
$this->bbcode_second_pass_quote('OilFinder2', 'L')arge auctions of 5 and 10-year notes later this week. We'll keep our fingers crossed!

[Jotapay]

$this->bbcode_second_pass_quote('OilFinder2', 'I')'m well-aware of that Jotapay. Which is why I said:
$this->bbcode_second_pass_quote('OilFinder2', 'L')arge auctions of 5 and 10-year notes later this week. We'll keep our fingers crossed!

[copious.abundance]

^
Read the articles I posted here. A falling dollar isn't necessarily a bad thing. And as I noted in the first post here, a steepening Treasury yield curve is also not a bad thing.

On Seeking Alpha the resident Treasury expert noted this:
$this->bbcode_second_pass_quote('', 'T')he yield curve is losing its curve and is about to go perpendicular. The 2 year/30 year spread is closing the day at 356 basis points. I have recounted many times here that the widest level for that spread since man has walked erect was at 369 basis points in October 1992. The yields were 3.60 and 7.29 percent, respectively.

The 2 year /10 year spread is 262 basis points and it is within hailing distance of its record level of 273 basis points which I believe we touched in 2003 when the Federal Reserve pilots were just receiving their helicopter licenses.

[copious.abundance]

As I said:

>>> CNN <<<
$this->bbcode_second_pass_quote('', '[')b]Green shoots? Check the yield curve
The gap between the 2-year and 10-year Treasury yield is widening, a sign that typically indicates the economy is getting healthier.
By Catherine Clifford, CNNMoney.com staff writer
Last Updated: May 20, 2009: 3:30 PM ET

NEW YORK (CNNMoney.com) -- If you're looking for a sign that the economy may be on the mend, look no further than the Treasury yield curve -- a closely monitored harbinger of the economy.

The benchmark yield curve measures the difference between the 2-year and 10-year note yields.

When the spread between the two yields widens, it typically signals that the economy is headed for recovery. That's largely because it is viewed as the market rewarding investors for putting their cash away for a longer period of time.

When the spread narrows, or even becomes negative, it typically signals that the economy is headed for rough waters because it means that jittery investors are desperate to sink their cash in a short-term bunker trade.

[...]

[shortonoil]

$this->bbcode_second_pass_quote('', 'C')onsumers' overall assessment of current-day conditions improved again. Those claiming business conditions are "good" increased to 8.7 percent from 7.9 percent. However, those claiming conditions are "bad" increased to 45.3 percent from 44.9 percent. Consumers' appraisal of the job market was also more favorable. Those claiming jobs are "hard to get" decreased to 44.7 percent from 46.6 percent in April. Those saying jobs are "plentiful" edged up to 5.7 percent from 4.9 percent.

Consumers' short-term outlook improved significantly in May. Those expecting business conditions will improve over the next six months increased to 23.1 percent from 15.7 percent, while those anticipating conditions will worsen declined to 17.8 percent from 24.4 percent in April.

[BlueGhostNo2]

Further to your points I'm not sure the yield curve is a particularly useful indicator when QE is taking place.

[shortonoil]

BlueGhostNo2 said:

$this->bbcode_second_pass_quote('', 'F')urther to your points I'm not sure the yield curve is a particularly useful indicator when QE is taking place.

$this->bbcode_second_pass_quote('OilFinder2', 'L')arge auctions of 5 and 10-year notes later this week. We'll keep our fingers crossed!

[copious.abundance]

Some more info from Bloomberg.

The guy on CNBC just said it went "extremely well."

>>> LINK <<<
$this->bbcode_second_pass_quote('', '[')b]Treasury Five-Year Note Rises as Auction Draws Foreign Buyers
By Dakin Campbell

May 27 (Bloomberg) -- Treasury five-year notes rose for the first time in four days as the government’s auction of $35 billion of the securities drew the most demand from a group of investors that includes foreign central banks in three months.

The sale helped to ease concern international investors are focusing purchases on the shortest-term securities as record U.S. borrowing raises the threat of inflation. Indirect bidders, the class of investors that includes foreign central banks, bought 44.2 percent of the notes, compared with an average of 32.4 percent in the last 10 auctions.

“We have had this backup and all this conjecture about the U.S. credit rating,” said Kevin Flanagan, a Purchase, New York- based fixed-income strategist for Morgan Stanley’s individual investor clients, before the auction results. “The further out the curve you go there could be more difficulty” in getting the debt sold, he said.

The five-year notes auctioned today were sold at a yield of 2.31 percent, compared with an average forecast of 2.335 percent by eight bond-trading firms surveyed by Bloomberg News before the 1 p.m. bidding deadline.

Today’s so-called bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.32, compared with a 2.17 average at the past 10 sales of the securities. The Treasury sold $40 billion in two-year notes yesterday and will sell $26 billion in seven-year notes tomorrow.

[...]

[copious.abundance]

I was just watching CNBC and a guy they interviewed made a good point: While the yields of the longer bonds have been going up (they made a big move today), they're still low by historical standards. The government is still getting a pretty good deal on all this debt.

The 10-year yield


The 20-year yield


The 30-year yield

^
I guess they didn't sell 30-year bonds for a while.

Source for all

[yeahbut]

$this->bbcode_second_pass_quote('OilFinder2', 'S')ome more info from Bloomberg.

The guy on CNBC just said it went "extremely well."

[gnm]

$this->bbcode_second_pass_quote('OilFinder2', 'T')he 30-year yield

^
I guess they didn't sell 30-year bonds for a while.

Source for all

$this->bbcode_second_pass_quote('gnm', '')$this->bbcode_second_pass_quote('OilFinder2', 'T')he 30-year yield

^
I guess they didn't sell 30-year bonds for a while.

Source for all

[Jotapay]

Today was an eventful day. I'd begin hunkering down now and preparing for some serious money supply problems. Being a science guy, I get all my financial info from blogs and Ticker Forum. Once flight to perceived safety has swept down the curve to the shortest term bonds, and then to cash, and then to (?), it will be interesting to say the least.

I'd be getting ready for Mad Max after one or two more dominoes fall. I've never said that before and I will say it now.

[copious.abundance]

$this->bbcode_second_pass_quote('Jotapay', 'T')oday was an eventful day. I'd begin hunkering down now and preparing for some serious money supply problems.

[Jotapay]

$this->bbcode_second_pass_quote('OilFinder2', '')$this->bbcode_second_pass_quote('Jotapay', 'T')oday was an eventful day. I'd begin hunkering down now and preparing for some serious money supply problems.

[gnm]

I take it you don't have kids Oily... Because if you do their future is going to hell REAL fast... Laugh while you can monkey boy...

-G

[copious.abundance]

Let the good times roll!

>>> LINK <<<
$this->bbcode_second_pass_quote('', '[')b]Rising bond yields a sign of good times returning
Charlie Aitken | May 28, 2009
Article from: The Australian

MARKETS are amazing animals. One minute rising bond yields are seen as a sign of growth returning, but the moment bond yields rise too much they are seen as hampering the economic recovery as mortgage rates rise.

Bonds caused the damage last night, with US 10-year bond yields spiking 17 basis points to 3.72 per cent despite a successful five-year note auction by the US Treasury.

The yield curve steepened sharply, which worried the equity market, yet if you take a step back from the noise, a steepening yield curve is the bond market attempting to tell you that economic growth and inflation are on the way back later this year.

A steepening yield curve is positive for economically cyclical equities, but last night the market decided to focus on the effect rising long bond yields have on variable mortgage rates.

Rates on 30-year fixed US mortgages averaged 4.81 per cent last week, up from 4.69 per cent, and that is despite the US Federal Reserve standing in the long bond market buying Treasuries as part of their quantitative easing program. I still reckon the best trade in the world is shorting US Treasuries to the Fed’s buying. That would have made good money already.

I think bond yields rising is a good thing. It’s a sign investors are getting less risk adverse and a sign that growth will return. The bond market predicted the economic downturn and right now the bond market is attempting to predict economic stability and economic recovery.

[...]