Weak Buyback & Strong Auctions: Bullish Signals For Bonds
Last Thursday's Treasury buyback operation was deemed "weak" in the financial media as it bought back just $5.19 billion, less than the $6 billion investors had anticipated. A buyback succeeds only if current bondholders are willing to sell their existing holdings back to the Treasury at the offered price. Thus, a "weak" or undersized buyback operation means they weren't. Dealers and real-money investors chose to keep their bonds rather than part with them. The weak demand for the buyback was a hidden signal of demand, confirmed by the Treasury auctions. Last Wednesday's 10-year auction…
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