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Is BlackRock The "Mysterious" Direct Bidder?
Rumors swirling earlier this morning that the identity of the heretofore unknown direct bidder may be none other PIMCO competitor BlackRock. In part these rumors have been fuelled by an earlier WSJ article "BlackRock plays it safe - Treasuries" in which author Min Zeng notes that "the world's largest money-management firm by assets, has increased its
holdings of Treasury securities in recent weeks in response to the
unsteady outlook for growth, ongoing sovereign-debt woes and contained
inflation risks." If so, it will be interesting to watch the divergence in sovereign bond holdings between PIMCO, which has made it clear it finds the best opportunities in foreign holdings, namely Brazil, Russia, and Poland, and BlackRock, which prefers to play it safe by going domestic. Yet, is BlackRock merely being handed PIMCO's sloppy seconds? Bill Gross' fund has lately been marginally "constructive" at best on US Treasuries. To be sure, a deep pocketed buyer will be needed to absorb the trillions in upcoming UST supply, and with PIMCO allegedly out of the picture, the US Treasury will gladly take anyone's money at this point.
More from the article:
Curtis Arledge, chief investment officer of fixed income,
fundamental portfolios and a member of BlackRock's Fixed Income
Executive Committee in New York, said in an interview that he has
recently been "more constructive" on the Treasury market, moving the
firm's Treasury holdings toward neutral levels from last year's
underweight position.
Treasury securities are a preferred asset for investors looking to preserve capital amid economic uncertainty.
At the same time, the firm has reduced "meaningfully" its overweight
positions in other fixed-income assets, such as corporate bonds and
mortgage-backed securities, given that these markets rallied
significantly last year, he said.
"We see money leaving risky assets and [going] into more stable
assets," said Mr. Arledge, adding that Treasurys with maturities of 10
years or more are "attractive."
BlackRock's main rival in the bond market, Pacific Investment
Management Co., has been more bearish on the Treasury market lately. Bill Gross,
Pimco's founder and co-chief investment officer, said earlier this
month that he prefers German government debt, arguing that country's
fiscal health is better than that of the U.S.
Another question emegred: is BlackRock buying Greek debt. The corollary of whether it is hedging this with CDS was unasked.
Many governments face the challenge of balancing still-needed
support for the economy with the need to reduce high levels of debt and
cut their deficits, said Mr. Arledge, citing the Greek government's
austerity plan as an example. He declined to discuss the firm's Greek holdings.
As for other governments, BlackRock is neutral on gilts for the time being:
Turning to the U.K., whose debt levels are similar to Greece and whose
currency has plunged this week amid political and economic uncertainty,
Mr. Arledge noted that the country's government bonds, known as gilts,
and the pound have fallen pretty dramatically. At this point, he said,
he is neutral, neither a buyer nor a seller.
As we have repeatedly demonstrated over the past 3 months, the direct bidder category has become a major force in most Treasury auctions, having increased from an average in the low single digits, to the mid teens across the curve, including both Bills and Bonds. As Rick Santelli has pointed out, the question of what happens if and when the direct bidder has had its fill (be it BlackRock or someone else), even as indirects have been slowly lowering their takedown percentage, is open: will Primary Dealers be able and willing (absent Fed prodding) to assume the balance? With record supply still to come, this will be the main question as the year progresses.
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I read courtesy of Bob Chapman that Blackrock was a front company for the FED through which to make offshore purchases from the Cayman Islands.
Are we really regarding Blackrock as some kind of functional company other than a purely front company?
-MB
the direct bidder is the Fed. whether or not they do it through an agent does not really matter. it is the Fed. they will buy anything and they likely will not stop.
and for those who disagree all I can say is the only way we can satisfy the bet is a full audit of the Fed balance sheet AND cash flows. The Fed resists this. The US Congress resists this. The US Executive Branch resists this. Gee, I wonder why all the resistance...........
If the FED is backstopping Blackrock then Blackrock essentially has infinite pockets
Note to the PPT: Your stupid plan to boost the economy by illegally propping up the stock market, is failing. The real economy is in free-fall. The man and woman on the street is pissed off that you bailed out Wall Street at their expense. They are saving their money. They also resent the stock market rising. They see it as benefiting Wall Street. To the cognoscenti, you look like fools by having the Dow over 10,000 in the middle of a depression.
I don't know much other than I've had that ol' Sept. 2008 feeling for the last month. I was out of the country then in a third world S. American land of cheap booze and friendly women. An ex-pat asked me if I heard the news that AIG went under, I hadn't. I had about 20 open positions at the time and no way of trading. Two days later I was back home and pleasantly surprised, (as well as confused), that I was down just slightly. I couldn't hit the sell all button fast enough. The rest as they say, is history.
the direct bidder is the Fed. . .they likely will not stop. 'Nuff said.
The direct bid is QE 2.0
How deep are Blackrock's pockets? With trillions of issuance on deck for the foreseeable future, one wonders how much longer this can continue.
Although sadly, Deadhead is probably right, I suppose all roads lead back to the Fed.
"As Rick Santelli has pointed out, the question of what happens if and when the direct bidder has had its fill (be it BlackRock or someone else), even as indirects have been slowly lowering their takedown percentage, is open: will Primary Dealers be able and willing (absent Fed prodding) to assume the balance? With record supply still to come, this will be the main question as the year progresses."
Am I correct in thinking that very few people believe the Treasury auctions are "real", in the sense that most people think there is a hidden hand, some sort of manipulation? If so, what do these fools think is the outcome of this manipulation? Is this really just another example of everyone dancing until the music stops? Does everyone really participate in the delusion that they can beat the crowds to the exit when the earthquakes begin?
This is truly a classic example of herd behavior, encouraged by compensation methods and brinkmanship. I received my copy of "No One Would Listen" by Harry Markopolos and while I still have a bit more to go, it's a must read. If you would like to see the insanity through the eyes of a bean counter with an inquisitive and probing mind, read this book. It's hair raising in its almost matter-of-fact description of Wall Street insanity, helped along by the regulators and various other bottom feeders.
Only in such a large and pervasive crime syndicate as exists today can so many for so long have such a (self justified and rationalized) relationship with questionable ethical behavior. Or should I say lack of ethical behavior. Even the so called "good" guys play fast and loose with ethics. It's either do so or be quickly run over by the competition. This alone is why the system can't be reformed from within. Any attempt to do so is quickly crushed by the self interest of all.
I'm not sure they are concerned so much about the endgame of the manipulation as much as keeping the engine running while the theft happens. The vast majority of people have 0 intrest in researching treaury sales. They just know the system is grinding forward. We have been trained to see intrest in this sort of thing as weird.
They operate in a manner where we know there is manipulation but cannot conclusively prove the level of manipulation, and even if we could they would simply deny it, and the media would support the denial. They control regulatory and investigative bodies, the regulators themselves are our enemy as people will say "If there was a problem wouldn't SEC/FBI/etc be looking into it?" It's my humble opinion that they will run this scam until it totally blows up and forces its way into the reality of the common man, and then try to seize more open control. But until that happens they have more time to loot and prepare for their real endgame, which clearly does not involve a powerful financially stable USA.
No idea, but didn't Peter Fisher of "end the long bond at the worst possible time" fame go to BlackRock from the US Treasury? Not enough has been said about the colossal failure of that policy decision and its long-term effects on the economy.
Ok, so the New World Order crew has a "Black Rock" and a "Black Water" ... do they also have "Black Wind" and "Black Fire" tucked away somewhere?
Everyday the same damn conversation.
Where is Bill Murray?
The Fed is the buyer, it will never stop.
The musical chairs game can and will go on
until no one cares, until the sheep go back to grazing.
Many here assume that at some point the fed will be forced to stop buying its own debt.
WHEN?
I see no catalyst to make them stop. Inflation will never come of it. The increased money supply is soaked up by the increasing debt, it never reaches the economy.
What can make this stop.
My PIMCO Total Return has been performing awesomely so far again this year. No complaints from me if Gross goes foreign. I see in the latest Jan prospectus he has Brazil holdings. I don't blame him either, as I myself have money sitting in Treasury Direct waiting to buy some T's, but not at these measly rates they offer. I can do better with an I-bond right now at 3.36% which is higher rate than the 1,2,5 year and almost as good as the 10yr and I can sell the bond outright with no penalty after 5yrs. So tell me, which is the better deal? Yep, the I-bond. If Bernanke wants to buy the crap, then he will be the only one buying them soon, as people are heading out of US T's due to the spread manipulation the FED is causing in the markets. Just a matter of time before Bernanke is left buying alone.
If Blackrock is buying USTs they better be buying Greek bonds!
that could solve the direct bidder question. so blackrock is a suicide bomber as well? I guess they all are? how will they make money during the next decade? Hollywood's futures markets?
All you have to do is look at the ownership. Geithner, and Sumners selling though Fink and Kapito (Blackrock)....with Bernanke and all the Fed Member banks buying up the phony bills and bonds. What an incredible scam on the American people!
BlackRock is increasing Treasury exposure because all the new UST issuance is going into the index, remember PIMPCO/BlackRock are all relative return managers?? anyone? (was that seriously that hard to figure out??? wtf, not everything is a conspiracy)
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