Something Big Is Up With the Market

Yesterday and in last night's video I talked about the auction of 3 year notes and how the indirect bidders (read as China/Japan for the most part) were at an all time low. This was strange enough, but today's 10 year  auction (and this explains why the POMO cash was so limited today to a brief intraday rally) saw almost no participation by direct bidders (read the Primary Dealers of which there are about 40-including most notoriously-Goldman Sachs). The auction on the 10-year was $24 Billion dollars of which our direct bidders (GS, etc) bought up only $118,000-that's not a typo, less then half a percent!

Why would the direct bidders show so little participation? There's 42 I believe and their piece of the action was SO MINIMAL. This sounds like a conspiracy. Years ago the directs accounted for 1% or so, but that has drastically changed in the last few years. Now they are at .5% of the auction? Something stinks.

Even more surprising were the indirect bidders (foreign central banks mostly) today that took up an all time high of 71+%! Foreign Central banks swallowed over 17 billion dollars of the 10-year offering?

Has the Fed made some arrangement in which they can now start backing out of QE2? We'll have to see if the trend emerges, but we just saw two days, back to back showing some of the most incredible recent action in the bond market.

Something has changed, be prepared and pay attention.