A week ago a great debate was stirred in the financial blog world. As is often the case Zero Hedge was in the middle of the fracas. Mr. Durden penned a piece
that suggested that the Fed was manipulating the auctions in such a way
as to benefit the primary dealers. It got to be a very sophisticated
discussion that brought in some thinking from Yves Smith at Naked Capitalism and John Jansen at Across the Curve.
that suggested that the Fed was manipulating the auctions in such a way
as to benefit the primary dealers. It got to be a very sophisticated
discussion that brought in some thinking from Yves Smith at Naked Capitalism and John Jansen at Across the Curve.
The
debate is over is far as I am concerned. The Treasury had another
successful auction today of the 30 year. But in order to make it a
success the Fed bought
$27 billion of 15-30 year mortgage paper. The curve is the curve. If
Treasury sells duration while at the same time the Fed buys duration
the net impact to the market is negligible. The near simultaneous
supply and demand is expressed in the Agency MBS/Treasury swap market.
The numbers are so large that only pros are allowed to play. A $27
billion swap trade only benefits the dealers.
This is timed intervention. That is a polite way to say manipulation.
What we have is a complete breakdown of the legal system. At some point, the population will take the law into its own hands, and will be very hard to convince that what they are doing is wrong.
http://www.monkeybusinessblog.com/mbb_weblog/2009/08/this-fomc-announcem...
Folks, after the auctions you load up on TBT, and the other short treasury funds. What I do not understand is who is bidding this up right before the auctions. this is what I do not understand. Is the fed doing it to punish those who short treasuries. I have watched this pattern a few times now and they get clobbered at auction. I've taken profits wih a stop loss, but this strange trading pattern I do not get.
Here is your mindf#&%..
if we have a huge stock selloff again (and by huge I mean HUGER) watch the risk trade run TO tres, not away. Tres has amazing power now and the ability to raise taxes, avenues of liquidity that do not exist for other developed nations.
So, US is not as sick relative to the rest of the world, hence capital flows in not out. Despite the financial perversity, US wins for a few more years.
Interestingly, the advantage you talk about goes poof in a one world currency situation, which is when the US really gets screwed.
This issue is well documented by multiple sources. Fed sells the bonds. Buys them aslo driving down rates. buys back bonds they sold to primary dealers giving them liquidity which they then put in the market. Market rigged game. One of the reasons they do not want an audit. they also at crucial times sell euros and gold to try and prevent dollar collapse from happening too quickly and that way people do not panic. Strange that it would still be an isue people talk about. Even Barney Frank has commented on the practice of gaming the system for banks profits. He is Ok with it in order to recapitalize. the problem is that they use such a huge percent as bonus that we aren't recapitalizing so much as having a direct tas payer funded bank bonus pool. So 1/2 of the losses the fed is having on purpose, your tax dollar is going into bankers profits.
that's why these criminals should be tried and given capital punishment for crimes against the state. They are truly criminals who are fleecing our nation as it goes bankrupt and into default and have done more damage than Osama Bin Laden. Each and every day I do not understand the lack of riots. Today I went out on a Thursday night to a popular eating establishment. Empty, the economy/people aren't getting any better, but the bankers have their bonus given to them by the tax payers. Obama, Geitner, Summers, Paulson, Bernake, Blankfien, Liddy, Kashkhari, Parsons, all of the ousted heads of the wall street banks are guilty of treason, head of BofA too. Lets not forget the heads of the rating agencies. Knowingly pushing junk bonds on the market and selling them to the public. Prof. william Black (please do a search) has done extensive research and he knows this has been a massive cover up as well as do I.
Those who haven't realized that the system is gamed are fools. Obama's entire cabnet is from wall street almost. Wake up and smeel the coffee. lower the value of the currency for ever, decrease wages, increase debt, pay a low wage so you have to get in debt. You have virtual slaves that trudge to work each day so sme paper pushing bankers and fat cats in washigton sit back and steal the fruits of your labor. enslavement via debt
I think every american should stop paying their mortgages, taxes, and credit card bills as a from of protes. they going to throw an entire nation in jai. If everyone has a bad credit rating are they neveer going to sell you anythig.They make most of their profits giving credit to people with out good redit ratings!!! It is time for a revolution in this country to take back America and resore it to what the founding fathers dreamed of where those who vote actually have a say in government and corporate lobby groups do not conrol everything. The idea that we actually have democracy is a sham. Obama for change does the same tax payer rip offs as Bush. It is theater of the absurd and we are all sheep being led to the slaughter.
FED= Furnish Emergency Dollar
Hei, Hei, Hei,.....
Audit me if you can.
and when "john" was questioned, by me, on his original story as to why the changes were made to the indirect bidder classification..he responded with "I worked with people at the treasury and they are fine, upstanding people". Too bad that his story was nothing more then a related anecdote told to him by a third-party. His next response was that I had no proof....well neither did he but he sure was convinced it was for the original reason of "transparency".
He's a tool.....no more or less
MS
Did they buy the MBS paper from the PD's? No. They are buying a lot of it from the GSE's. In other words shoveling it into a black hole never to be seen again.
In the big scheme of things the auctions always are a success and 90% of the time the buyers are in the green for at least a few days after the auction. That's been the story since 1983 when heavy Treasury borrowing became a real issue. It's all same old same old. A well rehearsed dog and pony show. Attention is directed at one trotting pony this time, another next.
sleazy linking practices; borderline fraud ..http://www..
hat tip: gay porn and deceitful, slimy operators
The question i have is: if the Fed knowingly implements policy that would be counterproductive, what is the end game for them?
If they mange to get the consumers back to the shops by creating a feel good factor before China find a way to disinvest their massive holding of US treasuries, they will claim to have saved the World. This is the biggest financial gamble undertaken ever....will it pay off? time will tell. The end game is that they though we were on the verge of financial collapse and that social unrest would have followed, with this gamble the outcome may be the same or not, effectively if they were right about the incoming financial collapse, what they are doing now is buying the biggest digital option available. the result would either 1 or 0.
With China's exports down 23% in July (their numbers, so you gotta know it's worse than that), it seems we are not keeping up our end of the symbiotic/parasitical deal. Businesses here will not be buyers of Chinese goods to hold in inventory going forward in anywhere near the volumes of pre-2008. At the very least, China has a very real excuse to step down its investment in its No. 1 trading partner.
Please find enclosed a few words from the FOMC press release:
"The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets."
They are in the market and they are telling you (us) that they are there and they come and go as the wish.
Personally, I think that they don't come and go, rather they are always there as the "resident devil". We may go on and on about whether they buy outright from offshore accounts, or if they have a deal with PD so that they will make good if prices move adversely for a few days between auction and buy back, or if they are supporting the market by buying spread related instruments.... THEY ARE THERE!! and as long as someone is willing to sell them paper and ink and get paid in $ for it, we are fighting the printing press...unreal, sad, whatever, but none the less showing now (and for the foreseeable future) on a screen in front of you! Gabz
Quantitative Easing IS rigging the market. They are creating a supply issue when there is no demand for lower yielding trash
Can you look at the buying curve throughout the day. Looks all non guv buyers got a bump with their purchases the way it played out. Santinelli made comment on it today (yes, that one). Has that been how the guv is keeping people in the game looking at past auctions?
I don't think they keep it quiet at all. All the information is scattered across the internet and their behavior patterns. The issue is recourse. Just like the Goldman 'bot, what's the recourse for illegal behavior if it's not enforced or not "illegal." Remember-American Business is legalized stealing.
Look at yesterday's auction:
1) to sell hot shorter notes the market goes down. The risk trade is back on Monday and all those shorter notes sell briskly
2) Somehow, the 10 year auction does OK considering the disfavor bonds are in. Insinuation is primary dealers throw this shit out on the open market and the FED mops it up.
3) The FED then hoses buyers of Tuesdays 10 year bonds by announcing an "end" to easing about 10 minutes after the auctions close. There's a scam right there
4) The dollar races up in reaction to the easing announcement-with bonds crashing-and then the dollar instantaneously crashes back to low 78 DXY again. Somebody dumped right after the minutes were released. That sent Bond prices back up and the dollar cratered
5) In the meantime, the stock market which tries to sell off every morning, gets "trading errors" after dips to prevent a race to cash with an expected dive in the market.
6) Everytime there is sell volume, a miracle hand comes and bids prices up and turns on the NYSE "gremlins" that just can't execute sell orders in a timely fashion.
This is the PPT gone insane with their mandate. It's a Soviet-style control economy and there is zero price discovery in the markets(except for too expensive!)
Absolutely. This administration is
absolutely crazy in its manipulation
of the markets. Fewer and fewer people
want anything to do with them.
Interesting summary.
Any predictions of what to expect going forward?
The fixed income markets are about linkages. Spreads widen here and tighten there.
It would be interesting to know what information is exchanged between the primary dealers and the Fed about their balance sheets since the Fed is the main regulator for BofA, C, GS, JPM, and MS.
That is a lot balance sheet to regulate and trade with. So I guess the Fed can help keep the dealers alive in addition to doing QE
the fed bought mtgs but the durations dont compare to that of a 30yr treasury..on the run 30yr has a 16 year duration...oad of 30yr 5S and 5.5s are are approx 4.2 and 3.5yrs - depending on seasoning etc..they could go longer if rates spike...
the fed did not rig the auctions..thats crazy..you seriously think they could keep that quiet? come on guys..
I don't think it is being kept quiet. It's being pointed out every day, but since there is no law enforcement, they do it regardless of what the public knows, because they are beyond the law. Just like everything else that has been going on since 2000.
you go! we have money at work here. careful with the hyperbole zh
sleazy linking practices; borderline fraud ..http://www..
hat tip: gay porn and deceitful, slimy operators
I profess my ignorance on this topic but to the best of my understanding there are few if any entities that would hold a 30-yr to maturity. Please elaborate on your point so we can better understand where you're coming from on this.
I guess a follow up question is in regards to the "open market" purchases of bonds after the auction. Zerohedge also published an article stating that a reader discovered that the FED was buying more treasuries 1-2 weeks after the auction to keep prices from crashing. As such, that is still quantitative easing, just through a backdoor. If so, then the FED is crooning about easing off the easing while still manipulating prices through primary dealer buybacks. The article insinuates that the primary dealers have no interest in owning the bonds and that they are "Asked" to purchase bonds to "front the market" and then passes it off to the Fed later on.