$5.6 Billion POMO Completed
Just when you thought the Fed was trying to gradually disintermediate itself from capital markets, they are off to the races with another POMO action. As of this auction, $276.3 of the $300 billion in Treasury repurchase allocation has been used up, leaving less then $25 billion for future POMO actions. As Zero Hedge discussed before, this total will be used up in the next 2 weeks. What then? All of a sudden the invisible bid under equities is looking very, very precarious.
Notably, of today's POMO, $317 million was used to purchase CUSIP KX7, which is the 3-Year that was auctioned off on June 9, 2009. The bulk of activity ($5.1 billion) was focused on CUSIP LH1.
And here is a graphic representation to either D-Day for equities or to QE 2.0
(2 votes)
on Tue, 09/01/2009 - 10:37
#55006
looking pretty tenous right now.
amusing that this is happening on kudlows watch
on Tue, 09/01/2009 - 11:13
#55075
Larry Kudlow could ignore a head on train wreck between two trains if the right people were driving them. Don't waste your amusement on him. He's oblivious to most things, and dishonest about the rest.
on Tue, 09/01/2009 - 10:43
#55017
*cues imperial march theme song
on Tue, 09/01/2009 - 10:44
#55019
Question, how much room do they have with the 1.25T of mbs buys?
This worries me. There is no difference when they buy Agency MBS or direct Treasury paper. These are both multi-trillion dollar markets. They may not buy much more direct paper. That would "look" bad. But there is nothing to stop them from buying another Trill of mbs if they wanted to. Who would object?
on Tue, 09/01/2009 - 10:56
#55037
I agree,
on Tue, 09/01/2009 - 11:20
#55087
I think they have purchased (or committed to purchase) $800B or so in MBS. They are going at a clip of about $25B a week. These guys keep a running total, not sure how accurate it is, but it seems about right.
http://www.mortgagenewsdaily.com/mortgage_rates/blog/
I stand by my prediction that the Fed will continue monetizing MBS into 2011. The proposal to "reform" Fannie and Freddie won't come until Feb, and there will be a lot of horse-trading to get something done before the election. Then give it a few months for any plans to be implemented.
Until then, with no full faith and credit backing, the MBS market is screwed without Fed sponsorship.
on Tue, 09/01/2009 - 11:27
#55101
They still have approximately $400 - $450 billion in Agency MBS left to purchase under their announced plans. (Bought roughly $800b)
on Tue, 09/01/2009 - 10:44
#55020
anyone else hearing rumors of pretty large bank failure??
on Tue, 09/01/2009 - 10:48
#55025
havent seen any trade halts
on Tue, 09/01/2009 - 10:51
#55031
rumors swirling about WFC. Haven't seen any details. Preferreds are getting a little haircut. Just a minor trim off the ears.
on Tue, 09/01/2009 - 11:05
#55060
You mean the infamous 'Van Gogh'?
on Tue, 09/01/2009 - 11:32
#55109
WFC? really? They will let 1000 reagionals go under before WFC.
on Tue, 09/01/2009 - 10:55
#55033
i've been hearing rumors of a 'large bank failure' since May. last week it was supposedly Bank of Montreal... but nothing happened... so who knows. the whole system is underwater. it just continues because the regulators are corrupt.
I think China cancelling the derivative contracts is probably most significant event I've seen lately...
http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSSP47327420090831
vampire squid declined to comment.
on Tue, 09/01/2009 - 10:57
#55038
Hoping and wishing the vampire squid dies this fall.
on Tue, 09/01/2009 - 11:08
#55068
I don't know how much affect this would have, but fasb wants more disclosure on how banks marked their ABS.
www.reuters.com/article/governmentFilingsNews/idUSN3143436320090831
on Tue, 09/01/2009 - 12:08
#55158
"I think China cancelling the derivative contracts is probably most significant event I've seen lately... "
smart move on China's part. that's exactly what they should do. they know that the counter parties all have free unlimited loss insurance courtesy of the taxpayers. they may as well carve themselves out a large piece.
some music for you taxpayers ...
[playlist]
numberofentries=1
File1=http://74.63.47.82:8300
Title1=(#1 - 29/200) Doomed: Dark music for tortured souls [SomaFM]
Length1=-1
Version=2
on Tue, 09/01/2009 - 14:05
#55059
no
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
on Tue, 09/01/2009 - 11:31
#55107
Someone commented a little while back about Wells having trouble with intrabank lending, I believe.
on Tue, 09/01/2009 - 12:04
#55151
@Curbyourrisk
"anyone else hearing rumors of pretty large bank failure??"
yeah, they've all failed....where have you been?
on Tue, 09/01/2009 - 10:49
#55026
Certainly don't want to be short if QE 2 is announced. They said they weren't monetizing the first time, don't think people will buy that again. If it is announced I suspect there will be a lot of populist outrage that will bolster support for the Fed audit. In any case, if QE 2 isn't announced I think there will still be strong demand for Treasuries but at the expense of equities. Whatever happens, this looks to be one of the major events that could set off major volatility this fall.
on Tue, 09/01/2009 - 11:06
#55064
Any chance this'll come as part of Geithner's press conference on Sat in London at the G20 Finance pre-Pitts meeting?
on Tue, 09/01/2009 - 10:58
#55040
No surprises here---Helo Ben has to support the indirect bid.
$54bn (expected) new coupon package on the deck next week.
http://www.treas.gov/offices/domestic-finance/debt-management/quarterly-refunding/08-05-2009/financing-tables-q3.pdf
on Tue, 09/01/2009 - 11:00
#55048
We're testing some support this morning. Will be interesting when action picks up later today, AH style.
on Tue, 09/01/2009 - 14:05
#55054
all systems go
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
on Tue, 09/01/2009 - 11:04
#55058
All of a sudden the invisible bid under equities is looking very, very precarious...
Yada yada yada, blah, blah, blah. I'll believe it when I see it.
on Tue, 09/01/2009 - 11:11
#55071
Take a look!
on Tue, 09/01/2009 - 12:08
#55156
Fool.
It is not a bid under. It is a bid over ask. Sure cure to smash shorts.
on Tue, 09/01/2009 - 11:06
#55065
FRNY just changed the rules for Agency POMO. It will now buy on-the-run securities, creating ever more demand for newly minted trash:
http://www.precisioncapmgt.com/2009/09/01/fed-changes-agency-pomo-rules-thoughts-from-gaming-the-markets/
on Tue, 09/01/2009 - 12:34
#55184
wooo another round of drinks
on Tue, 09/01/2009 - 11:15
#55078
CUSIP 912828LH1, Issued 8/17/09, $37B issued.
Today, Fed bought $5.1B.
on Tue, 09/01/2009 - 11:19
#55082
QE 2.0 would neither be the end of the world, nor the end of the Dollar.
Monetizing debt is the only chance the world has to get out of debt. That or taxing everyone to death whilst cutting government and public services to nonsensical levels. Creating a growing underground economy and a flight from all things paper into all things shiny in the process. Don't think anyone here really has the stomach for that scenario no matter how much they want it.
They may avoid QE 2.0 with a surprise rate increase and be able to strengthen Dollar. But that would still not automatically sell 1 trillion fresh paper this year and 2 trillion next year. Not including health care reform with a public option which requires funding also.
Asset inflation got us into trouble, more asset inflation needs to happen to get us out.
on Tue, 09/01/2009 - 11:24
#55091
www.nytimes.com/reuters/2009/08/31/business/business-us-usa-fed-dudley.h...
on Tue, 09/01/2009 - 11:19
#55084
Don't worry bears, all of this money will be spent on hookers and blow.
on Tue, 09/01/2009 - 11:46
#55127
glad to see my tax dollars at work
on Tue, 09/01/2009 - 11:59
#55144
These ladies of the night and Afghan farmers need the money as much as you do.
on Tue, 09/01/2009 - 14:07
#55272
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
on Tue, 09/01/2009 - 11:25
#55096
Can someone tell me what a POMO is? I follow the articles here but am not a finance professional. Thank You.
on Tue, 09/01/2009 - 11:54
#55136
POMO = permanent open market operations. Basically the Fed (our private corrupt central bank) goes and permanently purchases securities (some form of bond) from 'primary dealers' (big ass banks) in exchange for cash.
POMO:
JP Morgan ----> US Tbond -----> Fed
JP Morgan <---- Cash <----------- Fed
Primary Dealers
BNP Paribas Securities Corp.
Banc of America Securities LLC
Barclays Capital Inc.
Cantor Fitzgerald & Co.
Citigroup Global Markets Inc.
Credit Suisse Securities (USA) LLC
Daiwa Securities America Inc.
Deutsche Bank Securities Inc.
Goldman, Sachs & Co.
HSBC Securities (USA) Inc.
Jefferies & Company, Inc.
J. P. Morgan Securities Inc.
Mizuho Securities USA Inc.
Morgan Stanley & Co. Incorporated
Nomura Securities International, Inc.
RBC Capital Markets Corporation
RBS Securities Inc.
UBS Securities LLC
http://en.wikipedia.org/wiki/Open_market_operations
http://www.newyorkfed.org/markets/pridealers_current.html
I think this is how it works -- I am not a finance professional either -- so comments welcome if I have gotten this incorrect.
on Tue, 09/01/2009 - 13:06
#55222
NOMO POMO FODA MOFO
There, plain English.
on Tue, 09/01/2009 - 13:32
#55249
Thanks.
on Tue, 09/01/2009 - 12:03
#55149
"The bulk of activity ($5.1 billion) was focused on CUSIP LH1."
and that Note was issued mere 2 WEEKS AGO:
http://fixedincome.fidelity.com/fi/FIBondDetails?cusip=912828LH1&ordersystem=AORD
as for the rumor about some bank/banks: go get your money while you can!
that 1.5% interest on your deposit is not worth all the sleepless nights you're gonna have when the shit hits the fan
and yeah, keep shorting
on Tue, 09/01/2009 - 12:57
#55211
I'm thinking bank holiday thursday, friday close down about 40 of them open back up monday. It's gotta have a bank holiday before long because they can only close max 5 a weekend. Going to have to extend the weekends out.
on Tue, 09/01/2009 - 12:59
#55212
"that 1.5% interest on your deposit is not worth all the sleepless nights"
who even pays 1.5% interest these days?
agree, though, on the sentiment - take your money out of the stress test 19, put it in a community bank or credit union, up to the deposit insurance limited.
on Tue, 09/01/2009 - 13:13
#55229
The deposit insurance means nothing...might as well put your money in treasuries....at least they yield more.
To me, it is effectively the same 'insurance'. As anything that the FDIC bails out now is just coming from congress, not their DIF.
on Tue, 09/01/2009 - 14:05
#55264
what a doosie
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
on Tue, 09/01/2009 - 22:55
#55838
sigmadelta
ur a mooch
on Thu, 09/03/2009 - 13:58
#57830
I am trying to understand this data. And from the NYFED website I don't see where you numbers are coming from. I have seen where the fed stated they would be using 300 billion for repo's. Where did you find that they have spent 276 of it? Par amt accepted doesn't come close. par amt submitted is short too. I added those up and got 256 billion. And that was from 7/30/09 to today.
I am nervous about the auctions next week with the way the yield has been nehaving and all the bantor from overseas. So I am trying to figure out how much of this 128 billion the fed can handle buying.
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