"I read an article, I think it was on Bloomberg. The last auction of U.S. TBonds was undersubscribed the most in the last ten years, yet the TBonds were bought and the Yield when down accordingly. I surmised that if it was way undersubscribed then the FED would have been the one to buy more. As a side note, I don't believe the QE has been tapered at all. I think they are just being loose with the figures.
Just my opinion of course and if you have any proof they didn't apart from them stating less QE then Id like to see it if you could post it."
I read somewhere, I assumed, I surmised, I inferred, I thought,... and if you don't believe me then the onus of proving that I am wrong is with you.
"Following yesterday's very disappointing 5 Year $35 billion auction by the US Treasury, Germany followed up today with its own unsubscribed bond auction failure, after Germany sold just €4.825 billion in 5 year bonds at the 2011 low yield of 2.16%. The problem - the auction remained technically undersubscribed as the €6 billion offer only received €5.445 billion in bids. Even on a sugar coated basis, the BTC was just 1.1, a plunge from the 1.9s seen recently. But such is life without the backstop of Primary Dealers who buy up everything there is, until they themselves are no longer able to flip the shell game."
This article is not recent but it tells us this: "But such is life without the backstop of Primary Dealers who buy up everything there is,.." which seems to imply that those that step in are the Primary Dealers and not the FED.
How do they do it? I am not sure, but most likely through underwriting because that is one of their businesses.
