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Treasuries Slide After Ugly, Tailing 20Y Auction
After last week's dismal 30Y auction, which we said "bombed" due to a surprising lack of investor demand and significantly repriced the bond market sending yields sharply higher, bond traders were cautiously looking forward to the results from today's 20Y auction, the 4th since the tenor was relaunched in May. And just like last week, it wasn't pretty.
The sale of $25BN in 20Y bonds priced at a high yield of 1.185%, well above July's 1.06% and tailing the When Issued 1.176% by 0.9bps.
The bid to cover was just as ugly, sliding to 2.26 from 2.43 last month and the lowest of all 20Y auction since the May resumption.
Lastly, the internals were also ugly, with the Indirect takedown sliding to just 62.6%, well below last month's 67.0% if better than the foreign demand in May and June. And with Directs ending up with 11.2% of the auction, Primary Dealers were left with 26.2%- the highest allottment so far.-cap #2-3
Bottom line: while not as ugly as last week's disappointing 30Y, today's 20Y left a lot to be desired, and the yield quickly spiked to session highs across the long-end of the curve, even if it has since regained much of the losses. That said, the 10Y is now back to where it was before last week's 30Y auction so bond investors appear willing to forgive and forget, for now.
https://www.zerohedge.com/markets/treasuries-slide-after-ugly-tailing-20y-auction
FOMC Minutes: "Uncertainty surrounding the economic outlook remained very elevated"
Participants observed that uncertainty surrounding the economic outlook remained very elevated, with the path of the economy highly dependent on the course of the virus and the public sector's response to it. Several risks to the outlook were noted, including the possibility that additional waves of virus outbreaks could result in extended economic disruptions and a protracted period of reduced economic activity. In such scenarios, banks and other lenders could tighten conditions in credit markets appreciably and restrain the availability of credit to households and businesses. Other risks cited included the possibility that fiscal support for households, businesses, and state and local governments might not provide sufficient relief of financial strains in these sectors and that some foreign economies could come under greater pressure than anticipated as a result of the spread of the pandemic abroad. Several participants noted potential longer-run effects of the pandemic associated with possible restructuring in some sectors of the economy that could slow the growth of the economy's productive capacity for some time.
A number of participants commented on various potential risks to financial stability. Banks and other financial institutions could come under significant stress, particularly if one of the more adverse scenarios regarding the spread of the virus and its effects on economic activity was realized. Nonfinancial corporations had carried high levels of indebtedness into the pandemic, increasing their risk of insolvency. There were also concerns that the anticipated increase in Treasury debt over the next few years could have implications for market functioning. There was general agreement that these institutions, activities, and markets should be monitored closely, and a few participants noted that improved data would be helpful for doing so. Several participants observed that the Federal Reserve had recently taken steps to help ensure that banks remain resilient through the pandemic, including by conducting additional sensitivity analysis in conjunction with the most recent bank stress tests and imposing temporary restrictions on shareholder payouts to preserve banks' capital. A couple of participants noted that they believed that restrictions on shareholder payouts should be extended, while another judged that such a step would be premature.
https://www.calculatedriskblog.com/2020/08/fomc-minutes-uncertainty-surrounding.html
Fed policymakers zero in on strategy tweaks, minutes show
Federal Reserve policymakers are considering tweaks to monetary policy that could result in the U.S. central bank sticking with aggressive stimulus measures far longer than under its previous rubric, minutes from their last policy meeting showed. The readout of the Fed’s July 28-29 meeting, published on Wednesday, also showed policymakers concerned that a recovery from the economic downturn triggered by the coronavirus pandemic faced a highly uncertain path. For instance, they judged that the swift rebound in employment seen in May and June had likely slowed and that additional “substantial improvement” in the labor market would hinge on a “broad and sustained” reopening of business activity.
The minutes also showed policymakers were nearing agreement on changes to the Fed’s policy framework, including changes to its periodic Statement of Longer-run Goals and Monetary Policy Strategy.
moar
https://www.reuters.com/article/us-usa-fed-minutes/fed-policymakers-zero-in-on-strategy-tweaks-minutes-show-idUSKCN25F2DD
https://finance.yahoo.com/quote/%5EDJI
https://www.kitco.com/charts/livegold.html
Markets gave up most of it's gains on this and of course the metals get sold off too.
Ag -0.96 -3.45%
Au -60.20 -3.01%