In the context of obvious weakness in global markets, the save haven 3 yr note auction was uneventful. The yield of .427% was about where the when issued was trading and the bid to cover of 3.36 was exactly in line with the previous 12 month average. Direct and indirect bidders took the most amount since Nov. Speaking more to what’s going on in Europe, the ECB is learning first hand what the Federal Reserve has seen itself over the past few years but keeps repeating, aka Groundhog Day. Once the monetary medicine runs its course, markets reverse and any specious economic benefit does as well. This then leads to the next round of monetary medicine. The ECB has used up 1T euros for a few months of respite and while they won’t go back to the well any time soon as ECB Gov Nowotny said an hour ago, he also said “you can never rule anything out in financial markets.” In other words, they will at some point as will the Fed but only after the downturn picks up steam. At what level in the markets is the Bernanke/Draghi put now? That is the question. It’s a sad state of monetary affairs but we were put there and have to deal with it.
