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Fed Completes $830 Million 7 Day Reverse Repo
In a repeat of the "tightening" days from last spring when the Fed was posturing with one after another reverse repo to demonstrate just how prepared it is to take out money from the system (and look how that ended up), the FRBNY has once again started to conduct Reverse Repo tests, today removing $830 million in liquidity from the market, by reverse repoing $320 million in Treasurys at a 0.1%, $260 million in Agency notes at 0.13%, and $250 milion in Mortgage Backed debt at 0.16%. The term of the operation was 7 days. Considering this is about 10% of the amount POMOed earlier, to say this operation has any impact at all is aggressive. The only question is whether the reverse repo TOMO will be the same easing harbinger that it was last year.
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JOKE!
It's to support all the jaw-boning done by their governors last week.
It should fool no one.
Dooooooode! Totally awesome! A whole $830 Million! Man, they really mean it!
yes $0.83 billion - with a "b"
Like taking an eyedropper to empty a swimming pool -- pathetic!
Yep, tis but a show, and a terrible, insincere, and unconvincing show, for all the world, as Berbankincide & Lockhart & Co. are filthy criminals, who know no morals or ethics.
Look at little Lockhart, lackey to the Bernank, naked and without clothing.
OMFG, are they back at that again, what a fucking joke, this is nothing but a charade, there is no way they can tighten, let's see them stop printing money and see what happens, just two months without daily POMO's Benocide, let's see how that little experiment works...
Even The Fed is afraid to fight The Fed. Now what?
Latest King World News interview with Jim Rickards:
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2011/3/27_Jim_Rickards.html
contains several 'shout outs' to ZH. Would be interesting to get ZH's reactions to Rickards saying ZH is not fully understanding all of the tools available at the Fed's disposal.
This comment is not flammatory, I respect the opinions and insights shared by both groups and I think the reply would be informative.
bania -
Thanks for that link.
How could Rickards get the impression that Zero Hedge "is defending the Fed's position via its twitter feed?"
I listened to his 3/27 podcast. I am still mulling over what's he saying given how rapidly things are unfolding. There's a lot to chew on.
Rickards is a very smart guy, but he is the one who seems to be defending the Fed, and even goes so far as to claim they'd rather not be doing QE, etc. He almost seems to be caught up in the efficacy of their alchemy.
He also claims that QE is losing steam, as have low interest rates, etc., but that the Fed will do not do QE3, but rather, 'QE by stealth,' by simply reinvesting their (now) massive balance sheet (which includes principal and interest payments on MBS) into 'being a buyer at margin of treasuries,' in order to reduce nominal interest rates on treasuries.
If he concedes that QE is losing steam, how would such an approach do anything remotely effective in tamping down interest rates, when full blown QE2, which is 100 billion per month in POMO, has not only failed to lower interest rates, but has seen interest rates go higher?
Rickards was just saying the Fed could continue QE off of it's current stock regardless of maturity dates because they could swap out maturities. There was an article on ZH earlier saying there was not enough maturing this year to do QE from rollovers of current stock.
Besides, you know Rickards on here somewhere trolling. Look at how often he Twitters. He is here. You don't want to start that flamewar.
j/k
Agreed, Rickards seems to be a bit of a believer in the magic fairy dust the Fed throws around. As for the impact of reinvesting MBS principal paydowns, that isn't going to do jackshit. Let's be clear about one thing: QE was designed to prop up the stock markets and induce some kind of "wealth effect". Reinvesting principal paydowns isn't going to cut it, when shadow banking levels still have a long way to fall.
Flipside argument to that, inline with Rickards and ZH pls correct if wrong:
Med-dur rate averages would otherwise be even higher even sooner.
QE a success in that there is that much less volume for other parties to demand a lower price for/
When it gets too far they will ride in to the "rescue" with QE3 guaranteed. They can then pay uber premiums for paper to PD's helping them yet again in the depths of housing drop redux2.
I'd like to see Rickard's math if he modeled his claims.
I realize he put the disclaimer (rightfully so) that the Fed is not transparent, so he's been forced to speculate to some degree, but I'd love to see how much he thinks the Fed is going to be able to roll over into continuing treasury purchases if QE2 ends, because a lot of that has to do with maturity dates, interest to principal paid, default/delinquency rates, etc.
Let's count all those tools:
1) Devaluing the dollar.
.........
(does anybody know if NOT devaluing the dollar counts as a tool?)
Angles dancing on the head of a pin......
Harbinger Open Market Operation?
so...that's HOMO?
So, other than giving the Fed heads and their minions (Burnett, Kudlow, et. al.) talking points about the Fed preparing to tighten due to the "improving economy," is there any reason to actually do this "test?"
Probably another head fake... They spend 90% of their time on bs head fakes/jawboning and the other 10% deciding what they are going to do. Now the ratio has probably increased... whats to discuss?
one possibility is that it is tied in with the recent FEDSPEAK re tightening or at least no QE3, which could be an actual warning to the market to get ready for the above or just jawboning to create fear of same. The latter might allow perception to do the job of tightening for them. Much of the FED's power these days is psychological only.
The key point will be what the FED does with the money they raised by this, which we should see in the next week or two's FED balance sheet (BS). Will the raised cash (as Tyler points out, it's miniscule in the context of the FED's BS) just sit there, or be recycled into something like covering QE purchases or covering Treasury checks drawn on the Treasury's checking acct at the FED.
Don't dismiss the possibility that the FED will recycle the raised cash into new Treasury purchases. The entirety of FED QE for the calendar year 2010 was paid for borrowing the money to buy Treasury paper from the Treasury. And the Treasury raised the money they loaned the FED by selling, you guessed it, Treasury paper.
Or maybe they will use it to fund a drawdown of the Bank's massive reserve accounts at the FED. There are lots of ways this withdrawn money can simply flow back into the system and be less than it seems, even if the Reverse Repo numbers were much bigger.
Think check kiting.
Wow. What can one say except, Wow? You "taxpayers" are in for pain
$830 million. It will be interesting when it's $830 Billion.
Yep. $830m is escort fees for the broker-dealers.
That's almost one billion dollars! Cash shortage imminent! Film at eleven!
$830 million after pumping in an additional $200B just from the removal of the supplemental liquidity facility...........now that is scary indeed.....
They will attempt to shut down QE2 on time to see if they can "manage" the stimulus shutdown. My take on it is that PIMCO will step in to buy back all the ten yrs they sold out just as rates rise into May/June. Fed certainly knows that if it can hat tip PIMCO a month or two early, they can get right sided to not only capitalize on it, but to help the FED smooth the transition.
impressive. [/sarcasm]
i like to call it what it is... KITING
Fed's balance sheet went from 8oo billion to 3 trillion in 24 months.
No small potatoes from the Bernank.
Lets see 500 billion in reverse repo.
Guess they're just checking to see if the computer keys that launch this still work -- it's been so long since they were used.
The EU is doing fake stress tests and we're doing reverse repos...
Elementary: so the fed swaps $830 million of bonds for $830 million in cash. For this, the fed will pay .1% annualized for 7 days. Point: this is insignificant to liquidity regardless if $830 million or $830 billion. In fact, let me argue that in order for the fed to pay interest on the reverse swap, they must print more money. AND the bank gets the interest on the bonds swapped to them. It's just another forced re-leveraging.
Therefore, bullish.
Your astuteness is duly noted.
Indeed. Makes the ponzi look even more ridiculous.
ditto