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Fed Floods Market With $3.9 Billion In Fresh Monetization-Based Liquidity, QE Lite Record

Tyler Durden's picture


The Fed is now getting desperate: today, Brian Sack gobbled up nearly $4 billion in bonds maturing between 2014 and 2016, the highest single day tally in this latest iteration of QE, and resulting in the lowest Submitted/Accepted ratio of QE Lite of 4.3x, indicating that the FRBNY markets team was in a rush to push as much liquidity as it could to the PDs so they latter could go out and push the beta wave a couple of inches higher. As for the bonds, the bulk of the purchases was in the 2014-early 2015 range. We have yet to do the Cusip analysis, but we wouldn't be surprised if this contains a bunch of 5 Year bonds that were auction as recently as a month or so earlier, further validation that Geithner's promises a year ago that the Fed would never monetize bonds was nothing but lies. And even so, the market can barely stay green. Today will likely be an interesting day, testing the ever-declining half life of bank intervention, in both FX and bond markets (but, don't worry, central banks and especially the Fed, never, NEVER, get involved in stock manipulation).


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Wed, 09/15/2010 - 11:17 | 583226 Arthor Bearing
Arthor Bearing's picture

The endgame cometh

Wed, 09/15/2010 - 11:36 | 583283 overbet
overbet's picture

Here is the real story of the day:

The NYSE has determined to cancel all trades in NUVEEN MARYLAND DIVIDEND ADVANTAGE MUNICIPAL FUND 3 (NWI PRC), executed at or above $10.65 between 09:48:05 am and 09:50:52 am ET today.

This decision is not appealable.

They are busting trades of an algo error that occurred a mere 3.5% away from the market, not even close to the erroneous trade policy guidlines but during the flash crash investors had to eat the losses caused by the same system up to 20% Come the fuck on

Wed, 09/15/2010 - 11:38 | 583288 EscapeKey
EscapeKey's picture

I don't know why they don't just cancel all trades, where the house doesn't win?

Wed, 09/15/2010 - 11:47 | 583317 HelluvaEngineer
HelluvaEngineer's picture

This is America goddamit.  We make the rules up as we go. 

Wed, 09/15/2010 - 12:31 | 583405 Sniper
Sniper's picture

I get cancelling the 200,000 and 9,999 prints but 3.5% is kind of dumb. From the T&S, looks like it was only 300 shares at 10.91, two prints on Arca and one on NYSE.

Wed, 09/15/2010 - 12:30 | 583401 Millivanilli
Millivanilli's picture

“I would rather earn 1% off a 100 people's efforts than 100% of my own efforts.”

John D Rockefeller

ZIRP and overall currency manipulations are all about one thing ultimately, robbing from the masses labor and efforts through the debasement of their money.

We have no recourse when our means of exchange are tawdry pieces of paper and base metals. They can pay us NOTHING in INTEREST for our hard earned money in order to do EXACTLY WHAT CROOKS LIKE ROCKEFELLER DID.

They've got us by the short and curlies on this folks. We need to collectively demand that CONgress DISSOLVES THE FEDERAL RESERVE. They have destroyed our money incrementally over time. It is nothing but THEFT.

Wed, 09/15/2010 - 12:32 | 583408 Sudden Debt
Sudden Debt's picture

It's not the endgame...

it's the end OF THE GAME.

Wed, 09/15/2010 - 11:17 | 583227 vote_libertaria...
vote_libertarian_party's picture



buy buy buy

Wed, 09/15/2010 - 11:55 | 583336 Buzz Fuzzel
Buzz Fuzzel's picture

Beans, bullets and a warm dry place to sleep.  Are you ready?

Wed, 09/15/2010 - 12:05 | 583357 Pope Clement
Pope Clement's picture

"Loose shoes, tight pussy and a warm place to shit" U.S. Secretary of Agriculture Earl Butz in 1982

Wed, 09/15/2010 - 12:09 | 583363 Buzz Fuzzel
Buzz Fuzzel's picture

Luxury in time of great deprevation will not be allowed until the redistribution of misery is complete.

Wed, 09/15/2010 - 13:17 | 583490 Battleaxe
Battleaxe's picture

Everything is bullish. Good news, bad news, beat expectations, don't beat expectations,..... BUY, BUY, BUY!

All because people think the Wizard of Oz (Ben) is more powerful than he really is.

Wed, 09/15/2010 - 11:18 | 583229 HedgeFun
HedgeFun's picture

Thats it.  I'm going long paper and ink companies.

Wed, 09/15/2010 - 11:21 | 583243 MarketTruth
MarketTruth's picture

Go long Internet bandwidth, 2TB hard drives and memory chips. ;)

Wed, 09/15/2010 - 11:45 | 583309 slyfox
slyfox's picture

by far the funniest comment I have seen on here, still laughing. nice!

Wed, 09/15/2010 - 11:20 | 583240 the not so migh...
the not so mighty maximiza's picture

Amazing info. What is the back up plan when interventions start failing regardless of size?

Wed, 09/15/2010 - 11:27 | 583258 MrVincent
MrVincent's picture

Helicopter drops from captain Ben. Literally!

Wed, 09/15/2010 - 11:49 | 583321 espirit
espirit's picture

Helicopter drops captain Ben!

Wed, 09/15/2010 - 11:27 | 583259 Internet Tough Guy
Internet Tough Guy's picture

Bigger, faster.

Wed, 09/15/2010 - 11:39 | 583290 EscapeKey
EscapeKey's picture

Thereby solving the problem once and for all.

Wed, 09/15/2010 - 11:20 | 583241 SheepDog-One
SheepDog-One's picture

WOW talk about desperation! And its not having much effect either, law of diminishing returns is a bitch.

Wed, 09/15/2010 - 11:30 | 583270 Boilermaker
Boilermaker's picture

Just like married sex.

Wed, 09/15/2010 - 11:48 | 583318 skohiu
skohiu's picture

it'll all come in at 2pm EST into the close.  booyah!

Wed, 09/15/2010 - 11:21 | 583242 Boilermaker
Boilermaker's picture

PHEW...I thought they would go for the full $4B.


Wed, 09/15/2010 - 11:23 | 583247 MarketTruth
MarketTruth's picture

So a one day liquidation/infusion of $4,000,000,000 only gets the market up 30/2 points? Velocity of money to near zero!

Wed, 09/15/2010 - 11:29 | 583265 goldmiddelfinger
goldmiddelfinger's picture

S+P down a frac. Think where we'd be without stimulus?

Wed, 09/15/2010 - 11:24 | 583251 Bearster
Bearster's picture

I don't think buying bonds from PD's can have much, if any, long term impact on the stock market.  The PD's are buying bonds at auction and then selling them to the Fed.  They don't need the Fed's money to buy stocks, they could just go and buy stocks instead of bonds in the first place.

Also, if a PD buys, say, $1B worth of bonds at a Treasury auction, and then 3 months later, the Fed buys those bonds from the PD at, say, $1.008B, that is a profit of $8M in 3 months, $32M annualized, or 3.2%.  That is the incremental money that the PD could, if they wished, put into buying stocks.  And they still have the calculus of what is the upside of the stock market vs. downside, and is this a good place for the bank's capital?  Particularly when they can make risk-free profits in the Treasury market!

I think we have market volatility because:

1) regular investors are fleeing

2) one group of speculators thinks that the Fed can inflate asset prices at will

3) another group of speculators sees the greater depression unfolding

It is war between groups 2 and 3.  Perhaps on POMO days, group 2 is emboldened?

Wed, 09/15/2010 - 11:36 | 583285 SDRII
SDRII's picture

PDs only a conduit to increase base money - where exactly is the fed "getting" this money that is being funneled to the Treasury to support the transfers that keep the income number afloat?

Wed, 09/15/2010 - 11:26 | 583256 orangedrinkandchips
orangedrinkandchips's picture

man, the volatility in everything (read: all one stock- every index etc) is crazy today...i feel like "they" are getting desperate to keep this up....i wouldnt want to be long all...

Wed, 09/15/2010 - 11:28 | 583260 goldmiddelfinger
goldmiddelfinger's picture

Drive it like ya stole it....especially since ya did

Wed, 09/15/2010 - 12:00 | 583345 Nick Utah
Nick Utah's picture

Ben traded helicopter for stunt plane.

Fly it like you stole it!

Wed, 09/15/2010 - 11:28 | 583261 Mitchman
Mitchman's picture

Bruce K was right yesterday-the pace of things is picking up.  Wonder what the next shoe to drop will be?

Wed, 09/15/2010 - 12:47 | 583438 Spalding_Smailes
Spalding_Smailes's picture

I think it will come in the $2.8 trillion municipal-bond market.

Wed, 09/15/2010 - 11:29 | 583264 nope-1004
nope-1004's picture

Geithner's promises a year ago that the Fed would never monetize bonds was nothing but lies


Send the pric to jail.



Wed, 09/15/2010 - 11:31 | 583274 goldmiddelfinger
goldmiddelfinger's picture

Convicted tax cheats always tell the truth

Wed, 09/15/2010 - 11:32 | 583279 Bearster
Bearster's picture

what about unindicted tax cheats?

Wed, 09/15/2010 - 11:52 | 583330 DaveyJones
DaveyJones's picture

remember, unindictment is the modern financial reform. S&L scandal, a thousand+ indictments, latest scandal?   

Wed, 09/15/2010 - 11:29 | 583266 Turd Ferguson
Turd Ferguson's picture

Once again, all you need to know heading into Q4:

Wed, 09/15/2010 - 13:20 | 583497 Problem Is
Problem Is's picture

Turd "Gold"
Thanks. I missed that post...

Wed, 09/15/2010 - 11:39 | 583291 Hard1
Hard1's picture

As I posted on the POMO news a couple stories ago.  The Japanese also contributing to the USD monetization since they need to park all the USD they get from selling yen in treasuries.

Wed, 09/15/2010 - 12:20 | 583380 wowser22
wowser22's picture

Then pray tell, why are treasuries getting blasted today?

Wed, 09/15/2010 - 11:39 | 583292 traderjoe
traderjoe's picture

Just like any future stimulus should be called the third stimulus (Bush tax rebates #1), future QE's should be #3. This is QE2. No matter that the "monetary base is staying constant", QE1 promised an exit strategy. There's no exit from this vortex. 

Go silver - break the cartel!

Wed, 09/15/2010 - 11:41 | 583302 Caviar Emptor
Caviar Emptor's picture

Market walking on eggshells. If claims disappoint tomorrow, it'll be a hat trick of bads. Look out. 

Wed, 09/15/2010 - 11:50 | 583322 HarryWanger
HarryWanger's picture

Claims will disappoint but I'm not sure what you mean by a "hat trick of bads". 

Wed, 09/15/2010 - 11:54 | 583333 Boilermaker
Boilermaker's picture

Hat Trick = 3

You obviously aren't a sports person.

Wed, 09/15/2010 - 11:58 | 583343 HarryWanger
HarryWanger's picture

I know what a hat trick is but what are the other two "bads"? 

Wed, 09/15/2010 - 12:09 | 583358 Caviar Emptor
Caviar Emptor's picture

Industrial Production, NY Fed, Claims = Hat Trick of Fed-sensitive news that may force the hand. There's downside to the Fed acting, and not acting.

Wed, 09/15/2010 - 12:23 | 583385 traderjoe
traderjoe's picture

IP seems to be considered in-line, as the previous revision is being once-again ignored (especially not looking at the serial revision process). 

I wonder what will happen with claims, since last week was a holiday week. Lots of opportunity for estimations, seasonalities, etc. And who fires someone right after a holiday? And isn't tomorrow a POMO day too?

Wed, 09/15/2010 - 12:32 | 583406 Caviar Emptor
Caviar Emptor's picture

IP in-line (although declining to near stall speed) is not what's eating them so much as chronic low cap utilization. That's a tried and true barometer that signals deflation risk. 

Claims on a short week should be less. Almost always is. But we may get a bad revision on the prior week. Fed is reading between the lines for some hints on which way to go with QE. They won't let a new downtrend take hold. 

Wed, 09/15/2010 - 12:27 | 583395 HarryWanger
HarryWanger's picture

I wouldn't necessarily call IP and Empire State disappointments. Not great but definitely not terrible. Hell even Bloomberg had this to say about Empire State:

"Business activity in the New York manufacturing region has firmed slightly so far in September, the latest report to point away from a double dip."

In their minds, all the latest data is "pointing away from a double dip". I don't think we'll double dip but we're going to be in a no growth scenario for a long, long time.


Wed, 09/15/2010 - 12:36 | 583417 reading
reading's picture

Did you seriously expect anything but a positive spin out of Bloomberg?

Wed, 09/15/2010 - 12:41 | 583428 Boilermaker
Boilermaker's picture

Really, no shit.  Why even bother with a station whose clients / advertisers are 100% financial institutions that want retail investors.  What's the point?

Wed, 09/15/2010 - 12:40 | 583425 Caviar Emptor
Caviar Emptor's picture

I won't dignify that.

Wed, 09/15/2010 - 14:55 | 583705 ColonelCooper
ColonelCooper's picture

Even Bloomberg????


Good one, Harry.  Glad to see the old "you" back again.

Wed, 09/15/2010 - 11:53 | 583332 skohiu
skohiu's picture

and the "market" will be up triple digits.

Wed, 09/15/2010 - 11:52 | 583325 cowdiddly
cowdiddly's picture

And the real problem lies in the fallacy of the arguement.

Wed, 09/15/2010 - 11:53 | 583334 docj
docj's picture
$3.9 Billion In Fresh Monetization-Based Liquidity

But do they have that "New FRN Smell"?

Wed, 09/15/2010 - 11:59 | 583346 HarryWanger
HarryWanger's picture

And to think, I was a key stroke away from selling my AAPL stock at yesterday's close. Moral of the story, don't fight these guys. They'll run this market so high your nose will bleed.

Wed, 09/15/2010 - 12:02 | 583352 EscapeKey
EscapeKey's picture

Ah the daily game (in Gold) has begun -> 1274 struct down to 1265 within seconds, for it to rebound to 1268. There's life in the old dog yet.


Wed, 09/15/2010 - 12:04 | 583356 Noah Vail
Noah Vail's picture

Eventually the day comes when the parasites kill the host. Wheee! isn't this fun?

Wed, 09/15/2010 - 14:44 | 583672 RockyRacoon
RockyRacoon's picture

Silver is a great microbicide.

Wed, 09/15/2010 - 14:56 | 583710 ColonelCooper
ColonelCooper's picture

Gee you're snarky.


Wed, 09/15/2010 - 16:16 | 583956 RockyRacoon
RockyRacoon's picture

Actually, not.  I have real life experience with using colloidal silver.

But thanks for the remembrance of posts past.

Wed, 09/15/2010 - 16:46 | 584046 Cognitive Dissonance
Cognitive Dissonance's picture

Well known among the alternative medicine crowd, of which I'm one.

The medical uses of silver include its incorporation into wound dressings to treat external infections, and its use as an antiseptic and disinfectant in medical appliances. There is however insufficient evidence to support its use in wound healing.[1] Silver is also promoted within alternative medicine in the form of colloidal silver, though it has never been proven safe and effective.

BTW, why would any drug company try to prove silver is "safe and effective" when their business is to sell drugs? Same for the so called regulators, which are thinly disguised cheerleaders and enablers.

Wed, 09/15/2010 - 12:22 | 583383 curbyourrisk
curbyourrisk's picture

It is called an EQUITY STICK SAVE!


Hmmmm...thnk the government knew of this in advance.  i really thought the $23 billion POMO on monday was much more than advertised.  Was I wrong????

Wed, 09/15/2010 - 12:35 | 583391 plocequ1
plocequ1's picture

Ok kids, Nothing to see here. The Feds work is done. The Fed bitchslapped all it's naysayers. The market is green . Now go home and get your fucking shinebox.

Wed, 09/15/2010 - 12:53 | 583449 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

QE Light speeding up the put on.

Wed, 09/15/2010 - 13:06 | 583478 Thunder Dome
Thunder Dome's picture

Market going higher.

Wed, 09/15/2010 - 19:00 | 584245 tom
tom's picture

This isn't the  endgame. QE2 is the endgame.

I'm still not convinced this is even QE or monetization at all. Show me the monetary base expansion. Show me net purchases of Treasuries, after subtracting the portion of these POMOs that is just rolling over maturing Treasuries, that exceed rolling off of mortgage debt. The proof will be in tomorrow's H.4.1.

I was mulling over how the money flows, in this so-called "QE lite", and it seems to me there's three basic routes. This is all oversimplified but essentially true. I know, for example, that there is not really just one mortgage per MBS.

1) A first financial sector entity buys an MBS from Fannie Mae, which funds a mortgage originated by Bank of America, which funds Barney and Betty's purchase of a house from Fred and Wilma, who repay their mortgage to Bank of America which repays the Fannie-managed MBS into which that mortgage was rebundled which repays the current owner of the MBS, which is the Fed. The Fed uses the money to buy Treasuries from a second financial sector entity which uses the money to buy Treasuries from Treasury, which funds general government outlays.

or: Fred and Wilma refinance their mortgage, and the rest is the same.

So what goes on here is that MBSs are functioning as a way of investing indirectly into Treasuries, while earning a higher interest rate than Treasuries. The Fed is foregoing that extra interest as it switches from MBSs to Treasuries. New home buyers are essentially paying that extra interest, unless they default, in which case the whole kaboodle gets tacked on to the public debt. 

2) Mostly the same as route 1, except the second financial entity uses the money to buy other financial assets.

What goes on here is the Fed, Treasury and the GSEs/agencies collaborate to recycle the money coming in from financial sector purchases of MBSs into financial sector purchases of other financial assets, such as corporate bonds or stocks.

3) Treasury injects capital into Fannie to cover losses from buying the Fed out of an MBS after Fred and Wilma defaulted on their mortgage and were foreclosed on by Bank of America. The Fed uses the money to buy Treasuries from a financial sector entity, which buys Treasuries from Treasury, paying for most of Treasury's injection of capital into Fannie, except for the chain of intermediary expenses, which Treasury has to borrow from the public.

What mainly goes on here is that when the Fed's MBSs go bad, the Fed gets replacement Treasuries, courtesy of Treasury's ongoing bailout of GSE/agency MBS guarantees.

Thu, 10/07/2010 - 06:12 | 631639 Herry12
Herry12's picture

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