This Is Economic War

NYSE Mid-Day Update

This is war:

China signaled its intention to drain excess cash from its financial system by unexpectedly raising the yield on bills at a central bank auction and announcing new rules to curb hot money inflows. Anecdotally, a ratings agency in China downgraded the U.S. to A+ from AA with a negative outlook because of QE2.

Jim

The bond auction results provide the casualty numbers.

Dealer participation rate fell to 34% today. Their participation rate has fallen to nearly 50% since 2009 (onset of the crisis). This is a huge deviation from the norm as purchase and resale is big business for primary dealers. Notice how indirect purchases have increased significantly since 2009. These are customers placing direct bids through a submitter. This can include Foreign and International Monetary Authorities placing bids through the Federal Reserve Bank of New York (big emphasis here).

As Jim said, it's economic war.

10 Year Auction Results:


30 Year Auction Results tomorrow...

Source: treasurydirect.gov