Sky cracks open, walls falling to the floor- Just as well to keep it, a guessing game in store - You're with me now, will be again - All other points in between
And cruel cruel mornings - Have turned to days of swim or sink - If living right is easy, what goes wrong - You're causing it to drown
Didn't want to turn that way - You're causing it to drown. Doesn't make a difference now - You're causing it to drown.
Jay Farrar/ Son Volt - Drown
After not reducing Treasury positions into year end, Primary Dealer holdings hit a new high. As Foreign holders have offloaded inventory at record pace and the fed has gug deeper into Twist, the Street is bulging with notes 3 years to maturity and under. FT/Alphaville showed last week, PDs -for the first time EVER - hold more Treasuries than corporates.
And yet: Away from the T-complex, Freddie sold 7B in 10 year paper. Macy's returned to "investment grade" and placed long dated debt. And in the ultimate slap to the EZ, SAB/Miller sold 7B in 3s, 5s, 10s and 30s rated BBB+ (S&P). This was the largest corporate deal in 2 years and was 144a placed from 150 to 200 over corresponding Treasury yields.
The implications of a beer company borrowing better than the nation of its take over target is odd if not amazing. (SAB is refi-ing the Australian Foster's purchase) It also shows that the Fed's QE and the Euro Zone chaos have sucked all the debt "air"out of the room. Academic fears of crowding out are being upstaged by a rolling wave of debts. The economic consequence is minimal as the system locks into a catatonic exercise. This is a situation we have described, not as a liquidity but a structural trap.
It didn't have to turn out this way - they're causing it to drown.