Understandably, the markets are now running on autopilot, with severe snow storms hitting the East Coast (US), Hedge Funds are trading with that HFT 'grind' on almost non-existent liquidity.
Looks like we got some cash hording going on.
...that and a major correction is due for 2011.
VIX :
re: 5yr UST flop:
From WSJ
NEW YORK (Dow Jones)--Treasurys sank broadly on the lukewarm reception for a $35 billion sale in five-year notes.
The benchmark 10-year note's yield, which moves inversely to its price, rose to as high as 3.470%, not far away from the seven-month peak of 3.568% on Dec. 16.
Higher yields failed to lure enough buyers to underwrite the auction, a sharp contrast to a $35 billion auction in two-year notes Monday.
The bond market responded by extending its losses, pushing prices to session lows as the sale raised concerns about the outlook for a sale of $29 billion in seven-year notes set for Wednesday.
"It was a surprisingly weak auction on the heels of a solid two-year note auction Monday," said Jeff Michaels, joint head of fixed income Americas at Nomura Securities International in New York.
"Holiday-period liquidity, combined with the residual effects of the snowstorm [in the northeastern U.S.], means that we can build in a further concession for the seven-year note auction before the market stabilizes," said Michaels, meaning that bond yields are likely to be pushed higher.
As of 1:58 p.m. EST, the benchmark 10-year note was 1 2/32 lower to yield 3.460%. The five-year note was 16/32 lower to yield 2.130%.
The 30-year bond was down 1 31/32 to yield 4.524%.
The Treasury Department sold the five-year notes at a yield of 2.149%, much higher than the 2.103% yield traded just before the auction. Higher yields suggested bidding prices were weaker than many dealers anticipated, as prices and yields move inversely.
That means the U.S. government had to pay up for the auction as the 2.149% yield is sharply higher than the 1.41% offered from the November sale. Still, the U.S. government's borrowing cost remains historically low.
The auction was 2.61 times subscribed, down from the average of 2.82 in the past four auctions. The indirect bid, which is a proxy for demand from such foreign buyers as central banks, was 36%. That is down from the average of 43% in the past four auctions.
"It is a sloppy auction. Liquidity is thin and a lot of investors already checked out of the markets heading into the year end," said Kevin Giddis, president of fixed income capital markets at Morgan Keegan Inc. in Memphis, Tenn. "This does raise concern about the seven-year notes' sale. I think we need to see more selling, or higher yields to get the auction done."
The five-year note's yield has risen from 1.465% at the end of November. Bond prices tumbled this month as demand for safe-haven Treasurys had waned. Many economic releases in recent weeks have been better than economists' forecasts, especially data from the U.S. That pushed many investors to sell Treasurys accumulated earlier in the year.
Many banks, companies and investors also closed their accounts for the year, which added to the selling in the Treasury market in the past couple of weeks.
Treasurys have handed investors a loss of 2.17% this month through Monday, paring their gains for the year to 5.47%, according to data from Barclays.
Overall, trading was thin. Light volume in the past week has fueled choppy trading and exaggerated some price moves, traders said.
5yr UST:
We will see how much risk (stocks) is picking up, especially with rates going upward. The Feds bond buy up has been an utter failure.
The play? Still betting against Europe and the EUR.
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