Now that the Fed is by far the biggest institutional holder of US debt, it is time to conduct a periodic review of what, how and when Brian Sack has been monetizing in the past two years. As a reminder, as part of QE1, the Fed purchased $300 billion worth of Treasurys, the balance going to MBS and agency securities. QE Lite and 2 have, so far, focused only on USTs: as Morgan Stanley summarizes, as of today, the NY Fed has purchased a total of $456bn Treasuries / TIPS since August 10, or the announcement of QE Lite. Since additional LSAPs were announced in November (or QE 2 proper), the Fed has purchased $380bn. As the Fed is now roughly half completed with QE2, here is where we stand.
Graphically this looks as follows:
First, and most important for those who enjoy frontrunning the Fed which now telegraphs what it will do within 24 hours with impunity, here is the list of bonds most likely the be monetized by the Fed in future POMOs:
Next, we present the hit ratios, or the Submitted to Accepteds by Sector:
A more detailed visual chart of buybacks by sector and by operations:
Cumulative CUSIP purchases for the duration of QE Lite/2:
Last is the presentation of how many bonds are monetized on an On The Run basis, versus n-Old (aged vintages). Obviously PDs enjoy dumping any just issued 2, 3,5 and 7 years, while holding on recent issuance in the 10 and 30 Year space.
Source: Morgan Stanley