End Of POMO Countdown: $8 Billion Down, $51 Billion To Go

Tyler Durden's picture

Today's POMO had two curious characteristics. The first was that the Dealers tried to put a whopping $28.4 billion in 2-3 year bonds back to the Fed, as ever more are doing all they can to offload existing positions. The deluge in reverse tenders resulted in the highest Submitted to Accepted ratio for all of QE2, after the Fed accepted only $3.2 billion for buybacks, bringing the S/A ratio to a whopping 8.9x. This was the highest Submitted to Accepted ratio since April 13, when the Fed monetized $5.01 billion in bonds following dealer tender interest for $42.9 billion, or an 8.6x S/A ratio. Not surprisingly, that POMO was also one focusing on bonds maturing 2012-2013, confirming that the PDs have far too much exposure in the short end. The second curiosity was that of the just auctioned off QZ6 (or the On The Run 2 year) not a single dollar was bought back by Brian Sack's minions. Since the 2 Year rallied substantially since the May 24 auction date, there is something oddly disturbing about this complete lack of action in what has traditionally been the most actively repurchased security. Alas, we have no explanation for part 2, while for part 1 it indicates that following the end of QE2 we may see some very substantial flattening of the curve if and when the dealer community finds itself short of cash in under 3 weeks. And speaking of the end of QE2, below is a chart showing the countdown to D-Day: $8 billion down (in the last POMO schedule), and just $51 billion to go. There are now just 11 POMO days, and 12 total POMO operations, including the double POMO on June 20. What happens next is all priced in according to Blackrock and CNBC.

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6 String's picture

For all the sound and fury, if the brainwashed and propaganda machine works hard enough, perhaps the end of QE2 will be the dog that never barks...

Libertarians for Prosperity's picture


The collapse doesn't happen when everyone is looking for it.  QE2 will end, and nothing significant will happen.

I'm far more worried about BAC.  It's down 25% in three months. Down ~50% since January.  Tepper is out.  SAC got out in November. It's rumored that Paulson is liquidating his holdings (there goes his "doubling by the end of 2011" call...LOL).  It's at 2 year lows.  With FASB and ZIRP and all the trillions of dollars thrown into the financial system, if this stock still can't find buoyancy, it's fucking done.

Even today, on a big up day, it can't get green. Just look at this chart:


Of all the known (and unknown) ghosts in the financial system, something might finally be coming to fruition in "America's Bank." 

Anyone remember what triggered the stunning reversal of our "depression" on March 9, 2009?  Out of nowhere, Citi made an announcement that they would be profitable for 1Q09. From that random press release forward, the equity markets have been on a historic bull run, riding on the coattails of bank profitability and faux solvency. Conversely, if the banks begin to erode and start posting deep losses again, that's when this "recovery" in the equity markets will get jammed into reverse.  

Don't pay attention to the end of QE2.....Watch BAC.




Cdad's picture

I'm far more worried about BAC.

Hey, who said you could peek at the man behind the curtain?

Spot on...perhaps Robo would like to suggest a reason that a collapsing Blight on America bank is a good thing for the market.  Something about forced reallocation of capital, or something.

The writing is on the walls today, per the financial sector.  All algo driven rallies should be sold until such time as the Counterfeiter in Chief reports that the printing presses have received their $600 billion dollar servicing and are ready to go again.

Volatility rising on market credibility as the we move inexorably towards Mutual Fund Redemption Hour [MFRH].

Cdad's picture

On with stories over at the BlowHorn [CNBC] about how analysts are bullish Scott's Miracle Grow because of the all the guys who use it to increase the yield on their marijuana plants.

You cannot make up this conspiracy of banker truth deflection...

cougar_w's picture

The rush for the lifeboats is on.

MarketTruth's picture

Exactly, and everyone is trying to leave the sinking ship. Soon the bagholders will be SOL and only a fool would be buying US debt to begin with UNLESS they had GUARANTEES from the Fed to buy it back within weeks, if not days of being purchased.

rocker's picture

Oh shit, does this mean FC2 following the end of QE2.   (Flash Crash II)  LOL

Bloomberg had a giggle today. Matt asked a trader why the rally.

His reply, It's just the momentum palyers who listen to the news and move the markets opposite of it.

Now they tell us what we already know. LOL

Hedgetard55's picture

POMO, we barely knew ya.

ceilidh_trail's picture

Past performance not a guarantee of future results...

ebworthen's picture

As for part 2, perhaps there is advanced word from the FED of new "opportunities" that will be presented post QE2 (e.g. - easing quantitatively in mysterious ways without a "3" attached).

Robslob's picture

It is all "priced in" Mr. Bernanke...

You are out of order...you all are out of order...gavel bangs loudly across the globe.

TooBearish's picture

Have no fear - a Repo 105 solution for your bloated balance sheets is always there...

swissinv's picture

a good foretaste of what to come - but no worries Basel III eh sorry I mean QE III is soon coming ;)

TexDenim's picture

Whoops! No one wants to be left standing when the rotten music stops -- or holding the hot potato for that matter. These bond bores aren't so dumb after all.

Cdad's picture

It must be time....time for the crocodile algo...the new wealth creation tool brought to you by criminal syndicate Wall Street bankers everywhere.  With a press of one button, now that stawks are at absurd intraday highs because a much anticipate wave of Chinese tourists is about to flood the US creating jobs for everyone...time for the wonderful algo that causes stocks selling to result in price appreciation, and stock buying resulting in lower prices...right?

So as the magical mystery Wall Street tour continues, and after you have used a x20 times power magnifying glass to discover the uber bullishness as measured by volume...jump aboard the crocodile algo...and watch all of your wildest dreams come true.


HelluvaEngineer's picture

Interesting what banks are doing in the face of this retard rally.

Cdad's picture

Correct.  That is the writing on the wall...and my guess is that the crocodile algo is as good any bet in the "second half" of the day...as likely as any other preposterous BS that is next to emerge...just prior to Greece going all Molotov.

The syndicate cares not a wit about the credibility of the market, based on today's utter nonsense, which is quite disconcerting.  

tallen's picture

The end is nearing.

gwar5's picture

Last one to sell, loses.

Cdad's picture

And the first one to sell is in the escape tunnel prior to rush hour.

redpill's picture

"So let us stop talking falsely now, the hour is getting late.  Hey!"


banksterhater's picture

Adler has been saying the Primary Dealers will puke, maybe this is now happening. He says they will sell stocks to be able to absorb Treasuries at auctions. Over my head I think.

"Over the next 12 months $25.8 billion of GSE holdings will mature, including $9.3 billion over the next 3 months. The next maturities will be on June 15 when $0.7 billion will mature. Then another $3 billion will hit between June 24 and July 1 as POMO is ending. The Fed has pledged to replace any maturing paper on its balance sheet with additional Treasury purchases. Including MBS paydowns and GSE maturities, this should translate to the Fed buying $10-15 billion a month in Treasuries for the remainder of this year. That’s essentially a starvation diet for the Primary Dealers, given that they face the responsibility for absorbing much of the expected $100 billion a month or more of new Treasury paper. "

topshelfstuff's picture

with the last POMO coming on the last day of the QTR, do the Big Banks benefit by a high Close, End of QTR, as much as Fund and Money Managers