$2.5 Billion POMO Closes At 7.5x Submitted To Accepted Ratio, Fed Monetizes Part Of Issue Auctioned Off Less Than 3 Weeks Ago

Tyler Durden's picture

Today's POMO (for all those who forgot, stocks needed that little extra oomph today, thank you Brian Sack) has closed and despite $18.5 billion in submitted par amount of interest, the Fed monetized only $2.5 billion of 2013-2014 bonds, the bulk of which being the 1.75% of 4/15/2013. And don't look now, but the $85 million of PB0's monetized were part of the same issue that was auctioned off a whopping two short weeks ago! In other words: Treasury issues, PDs hold for two weeks, and then turn around and sell right back to the Fed. Monetization Q.E.D. More importantly, the submitted to accepted ratio was far higher than average, indicating the PDs were again positioned weakly for this POMO, and as a result we may see a sell off in risky assets, as we disclosed previously.

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ThaiKev's picture

So there is 11.25B left for the 4th and the 8th.  Any chance they try to prop up the market on the 4th with a POMO of 10+ billion?

Tyler Durden's picture

Largely irrelevant. By then new QE2 POMO regime will be dominant

sethco's picture

what is the motivation for the PD's to buy the treasury bonds in the first place? Are they getiing some kind of premium? And is the FED restricted from buying directly from the treasury? Thanks.

Bananamerican's picture

"$85 million of PB0's monetized"

Peanut Butter Orgasms?

Cognitive Dissonance's picture

Peanut Butter Orgasms?

God forgive me for asking, but in what world is peanut butter and orgasms connected?

Umm........on second thought, never mind...I don't even want to know. However, I am compelled to ask; creamy or chunky?

bronzie's picture

"in what world is peanut butter and orgasms connected?"

remember those Reeces Peanut Butter Cup commercials?

"You got peanut butter on my ...!"

doolittlegeorge's picture

this is the "trillion dollar question" and a great one at that.  the easiest answer as i see it is "this prevents them from thinking."  should the Treasury market STILL blow up in spite of the Fed's efforts....well, it's the Fed's fault "that the private bank blew up" since "we were only doing what we thought the government wanted."  the more obvious answer of course is "the Fed will win since they make the Treasuries an unpoppable bubble."  I think the M&T method of "we're gonna take your TARP and buy every bank" is easily the best "strategy."  I have no understanding why no one is government hasn't said "yo, bro...this wasn't the idea of TARP."  Get's right to the "heart of the matter" tho, doesn't it?  And should the Dem's get clobbered tomorrow they'll be a BIG winner as well as Big Oil.

ThaiKev's picture

Makes sense.  Just thought they would try to negate a lower than expected QEII... guess I'm giving them too much credit.

uno's picture

Absolutely amazing you are the only one reporting on this.

jus_lite_reading's picture

You didn't think CNBC or Bloomberg would report the diagnosis of terminal cancer, did you?

Boilermaker's picture

I believe both CNBC and WSJ had minor one-day pieces on it. 

uno's picture

even business web sites will not, of course the MSM is useless.

Johnny Yuma's picture

Wow, market laughed at it and sold off. Hell of a morning!

BobPaulson's picture

Why wait two weeks? At this point they could recycle them the same day. Who's fooled?

SheepDog-One's picture

Thats my overall question as well...who the hell is fooled by any of this? Mom and pop 401K pension holder who is about to get poleaxed out of it all? I guess thats the main objective, keep everyone happy with their 401K until they pull the rug out.

Cognitive Dissonance's picture

More importantly, the submitted to accepted ratio was far higher than average, indicating the PDs were again positioned weakly for this POMO, and as a result we may see a sell off in risky assets, as we disclosed previously.

Thus the reason the Fed must escalate the Ponzi POMO. We all intuitively understand that any exponential ramp must by it's very nature..........err..........become even more exponential. Which means any inputs must also ramp exponentially. Law of diminishing returns and all.

As more and more people, institutions and countries begin to internalize the insanity of the Ponzi, the powers behind the Ponzi must ramp it up exponentially. Faster and faster does the dog chase its tail. The seeds of its destruction were sown the day it was begun.

LongSoupLine's picture

Parallel to being a heroin and/or crack addict.

Cognitive Dissonance's picture

I promise you one thing. 

When this is all over, being a heroin or crack addict will be considered much more socially acceptable than being a central banker. :>)

bronzie's picture

"more socially acceptable than being a central banker"

when we get to that point the sheeple won't distinguish between central banker or any other type of banker - any association with banking will put a person at risk of having their neck lengthened - same goes for people associated with the FIRE economy: realtors and loan brokers in particular

Vampyroteuthis infernalis's picture

CD, you are right that the Fed needs to exponentially increase the POMO to keep the Ponzi running. That is the reason they will not do so. It will not be obvious to the sucker investor as the rug is being pulled out from them. Big boys 1, everyone else 0. I still believe it is not in the Fed's interest to keep the market elevated for such a long time.

We shall see on Wednesday.......

Cognitive Dissonance's picture

I actually think you are correct. A number of times last week I posted that it appears the Fed was setting things up to "disappoint". I was quickly junked.

I personally think they need an excuse or reason to push the POMO Ponzi button. Meaning they need "credibility" again and the only way this is happening is to crash the market, thus causing the "power" interests to beg for more insanity.

Wall Street/Bank Street has led itself to a cliff. At the same time, Wall Street is beginning to question the insanity. Why not create believers again under the stress of severe losses?

"Make me write bad checks."

tmosley's picture

Dry power for PM purchases is advised, but don't sell PM's to get it, for God's sake.

doolittlegeorge's picture

I don't think Wall Street is in the business of "questioning things."  They've gotten the bailout AND the QE.  M&T has set "the standard" since "we're going to lend alright...to other banks by buying them"!!  Amazing.  The "insanity" is as it has been since day one in 2008 in public finance.  I fail to see how "bailing out the banks so they can agregate" makes any state with tenuous finances "better off."  Where's the "enlightenment" on this score?

b_thunder's picture


What's the PDs net gain from holding paper for 2 weeks? 

If the amount is substantial, why don't you send a letter to WSJ and other outlets to let ppl know who the Fed is really making money for.


TooBearish's picture

CARRY bonehead its what PDs do

SheepDog-One's picture

Theyre not just doing it to show green coloration in the markets as an end result in itself, my guess is its to placate fund holders until the moment of implosion. Who knows, that could be tomorrow if election fraud does not go well, perfect time to throw a tantrum of diversion and throw all blame for crashing the markets onto 'republicans' and 'tea party'...the nation would then be duly incensed at these meddlesome troublemakers and the devastation they've wrought...leaving the FED, Obama, Wall St banksters pointing their fingers and blameless.

HelluvaEngineer's picture

PPT beepers going off

EZYJET PILOT's picture

If the fed can do POMO, why can't they invent money and pay off the national debt? I suppose the middle class would no longer be slaves eh?

SheepDog-One's picture

Well thats really their main problem, isnt it? Keep an illusion going that no one believes in. Gets tougher every day! Thats why I dont believe in the 'slouch markets forward to infinity' rather a sudden paradigm shift quite soon, perhaps tomorrow would be an ideal day if elections turn very sour and Bens inconvenient truth of having to deliver on something that was promised to be massive and reality shows he can do maybe a few $100 billion bond purchases. I think they pull the rug out and point their fingers of blame at repubs and t party apple cart tippers...free passes for all!

ZakuKommander's picture

Don't forget the Iranians, Yemenis, or Muslims, as the target of blame in some way.

They are a better "other" to demonize by TPTB, to distract the vast majority of people , and thereby avoid  a hard look at the genuine causes of problems.

Ragnarok's picture

The fed wouldn't be able to cream off those lovely interest payments which were derived from real world production.  More like Serfs.

buzzsaw99's picture

If they did that then they would be out of business. Debt = Wealth.

hugolp's picture

If the Fed monetized all that debt hyper-inflation would happen tomorrow.

At the end of the day hyper-inflation might not be that bad (if you know its coming). The economy would suffer heavily but briefly, and the monetary system would be over. Finito! The problem is the Fed wants to survive, so they probably want to exit by stagflation, slow boiling. Some years of stagflation, the debt is gone (at least enough of it) and the Fed is still in place for a new round of bubbles. Yoohoooo!!! Lets ride!

Threeggg's picture

The market today is telling me in laymen's terms that we are Fucked !


Clark_Griswold Hedge Mnger's picture

Is that based on fundamental analysis or technical?

crzyhun's picture

Tyler, you nailed it. ZH is amazling. Market sells off....like the high that wears off.

raygun's picture

What does the FED pay for the bonds? Is it just Par?

centerline's picture

POMO ramp and camp starting to look more like "take the money and run" now.  Game is changing.

israhole's picture

Sounds like a circle-jerk to me.

SheepDog-One's picture

Obama and massive entourage set to leave the country for a few weeks, have you seen that loadout? About 80 planes, not even counting the cargo planes. Well Hillary is taking off too to fuck up Asia some more, so at least the country will get a breather while theyre gone.

And what better time to unhinge everything while the Bamster is away, watching the Festival of Lights, in India!

EZYJET PILOT's picture

I tell you boys, they know the game is up, there's going to be another false flag coming up.


Something Wicked This Way Comes's picture

I didn't think it was possble, fron a historic perspective, to make Jimmy Carter look like an effective leader.

Note Obama running away about the time the his brothers in arms get trounced. Fantastic.

EZYJET PILOT's picture

The HFT algorythym's are starting to develop a conscience!

Turd Ferguson's picture

The audacity of doing this:

And don't look now, but the $85 million of PB0's monetized were part of the same issue that was auctioned off whopping two short weeks ago!

is breathtaking.

Then, the MSM completely ignores and avoids mentioning. Again, just when I thought I'd heard it all, the Fed manages to leave me shaking my head and speechless.

TumblingDice's picture

Baby needs its medicine.

spanish inquisition's picture

And don't look now, but the $85 million of PB0's monetized were part of the same issue that was auctioned off a whopping two short weeks ago!

So they are turning inventory 25X, that's good right?

Paul Bogdanich's picture

This is the biggest story so far.  Fed has an auction.  Primary dealers take the excess.  14 days later primary dealers still can't sell the auction Fed purchases the securities.  In other words a failed auction.  You can only hide that for so long.  When we get to April through August 2011 where refis run 70Bn a week it's game over if the demand is still low so look for them to crash equities in 2011 to create demand for bonds. 

Battleaxe's picture

MUST --- JUICE --- MARKET --- TO --- POSITIVE --- CLOSE --- ON --- POMO --- DAY ---