The trends continue to reflect the intensifying effects of CICPI. Gold, silver, commodities, stocks, and soon bonds (from a US dollar perspective) show the signs of capital balancing reward against risk. The smaller markets such as gold, silver, art, rare collectibles are far more sensitive to CICPI. Thus, they move first with great amplitude. Bigger markets, such as commodities and stocks, tend to lag but will also receive safe haven capital flows. The whole sequence ends with a rejection of bonds. This is why the trend in bonds and bond auction results are so important.
10-Year Note Auction Results:
30-Year Note Auction Results:
Auction participation for the 10-year and 30-year continues to illustrate deteriorating demand from primary dealers and steadily increasing demand from direct and indirect bidders since 2009. These trends reflect waning demand for US treasury bonds through traditional outlet of 18 member banker and broker/dealer network.
There are three main classifications of buyers in Treasury debt sales.
(1) Primary Dealers - Primary dealers as submitters bidding for their own house accounts.
(2) Direct Bidders - Primary dealers as submitters bidding for their own house accounts.
(3) Indirect Bidders - Customers placing competitive bids through a direct submitter, including that yield. There are Foreign and International Monetary Authorities placing bids through the Federal Reserve Bank of New York.
Direct bidders are generally domestic non-primary dealer banks and large institutional investors. Their presence at Treasury auctions had been relatively small prior to the financial crisis in 2009 as direct bidders tend buy debt through the primary dealer network.
The trend towards increasing direct bidding participation rates suggests waning demand from the primary dealer and indirect buyers. It also suggests that a large investor is looking to accumulate Treasuries anonymously.
Source: treasurydirect.gov
Source: treasurydirect.gov
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