Fed Monetizes $24 Million Of 30 Year Bond Issued Last Week

Tyler Durden's picture

Last week, the US Treasury issued $16 billion in 30 year notes due 2040 (CUSIP: 912810QL5) which was one of the ugliest 30 Year auctions in recent history (Santelli grade: F), and which we speculated may be a dud as PDs were not aware of what the POMO schedule would look like, and that in turn it would likely be promptly refunded back to Bernanke. We covered that issuance in detail. Today, Brian Sack just completed a $2.2 billion POMO focusing on bonds in the 17-30 bucket, at a relatively high Submitted to Accepted Ratio of 5.1x (and yes, the higher than median ratio may be an indication why stocks are red again as explained before). What is most notable is that the last bond on the accepted list (highlighted below), of which the Fed monetized $24 million worth, is CUSIP QL5: the 30 Year bond auctioned off last week. And so the shell game continues.

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Careless Whisper's picture

they're not monetizing, they're creating jobs.

mikla's picture

This elephant is creating jobs too.

Ragnarok's picture

I'm gonna need more lube.

Manipulism's picture

Bill Blake:

The Celtic Chimera von Bill Black

William K. Black here. “I’m writing from the scene of the first Kilkenomics Festival, which brings together finance experts and professional comics to try to answer the public’s questions about why the world is suffering recurrent, intensifying financial crises, why Ireland has gone to the heights and crashed spectacularly, and what options does it have that other nations in crisis have used successfully.“

Read More » http://www.chaostheorien.de/artikel/-/asset_publisher/haR1/content/the-c...
Cleanclog's picture

Farcical, but borders on criminal manipulation.

On another subject.  Today is International Make Someone uncomfortable Day.  Bernanke seems to take this day seriously dishing out discomfort to Europe and China.  Who knew?

Cognitive Dissonance's picture

Fed monetizes $24 Million Of 30 Year Bond Issued Last Week.

Talk about premature ejaculation. Couldn't the Fed hold off for a few months?

ReeferMac's picture

I'm sorry, I must be thick... Did they sell the same bond twice? Or sold it last week, and bought it back (accepted it as collateral?) this week? So the Squid gave the fed billions in digital cash, the fed gave them a coupon, and today the squid sold the coupon back to the fed for the same pile of digital cash?

I  agree with Ragnarock. I'm not quite sure what's going on here, but something tells me I'll need that extra bottle when he's done with it.

Hansel's picture

You had it right.  The primary dealers bought the debt from Treasury last week.  The Fed bought the debt from the primary dealers this week, and probably paid the dealers a little more to compensate them for their troubles.

ReeferMac's picture

Thanks Hansel!

When I was in college I used to take a cash-advance on my checking account line-of-credit to cover the minimum payment on my credit-card while waiting for the "0% loan  check" to come in the mail.

I think I'm still paying on that one.... I

understand perfectly now....

RobotTrader's picture

Retail sales are booming.

XRT within a hairsbreadth of making new highs.

QE2 is doing exactly what the Fed wants.

jus_lite_reading's picture

LMAO! You picked the perfect picture! The welfare beneficiaries using their welfare checks at WalMart (aka China's liquidator) to buy CHINESE SHIT (aka cheap TV's and electronics).


Either you are shitting us or you're a complete moron.


Don't look now, but the cold war with China is getting hot...

Dr. No's picture

Just because a person shops a walmart, doesn mean they get welfare checks.  I have never received a welfare check, but I bought my last tv at walmart.  They are the cheapest.

jus_lite_reading's picture

I only singled out walmart because the picture shows a Walmart logo, in walmart. Did not intend to imply you were of the trailer trash community. Sorry.

Dr. No's picture

You can take a Dr. out of the trailer but you cant take trash out of the Dr.

Slash's picture

"but it's the cheapest price" is a huge part of why we're in such a mess. Start thinking about what you're buying and who makes it. Don't let price be the deciding factor. Wal mart is nothing but a force that keeps widening the gap between the haves and the have-nots. Don't support them.

Id fight Gandhi's picture

That's right, buy am American made HDTV.

Pfft. They're all china made.

InconvenientCounterParty's picture

It's zombie thinking like this that is the root cause of the shit storm we are in.

jus_lite_reading's picture

>>"It's zombie thinking like this that is the root cause of the shit storm we are in."


Relax, will ya? It's comedy not tragedy. The real root cause was fraud, corruption, lies all perpetuated by greed and then celebrated as progression.

Flounder's picture

Those sold in 2008 for around $750 and they have a secondary use as a heater as one review mentioned.


"This tv is great so far! The only thing I would suggest to turn it off when you are not watching it. The screen emits a lot of heat so its best to turn it off when you can. Other than that its a great tv for a great price!"

IEVI's picture

The stock market is not the economy. Unfortunately, pumping up stock prices does not equate to selling retail products...nice try though..oh and by the way that picture is from 2008.


trillion_dollar_deficit's picture

The Fed manufactures new Event Horizons on a weekly basis. 

NOTW777's picture

"And so the shell game continues"

and so does the perjury

101 years and counting's picture

Let's call POMO what it really is:  reimbursing the PD's for taking down all treasury auctions.  The amount if debt being issued is growing while the demand is falling.  So, either the Fed prints the money for the PD's to continue to take down auctions, or the PD's run out of money to do so and the US has a failed auction....and defaults.

jus_lite_reading's picture

I'm getting uncofortable watching the monetizing getting so close to a daily issuance. At that point, yields will explode.

mule65's picture

30 yr fixed average mortgage: 4.55%

Fraud-Esq's picture

Fed is putting the bonds on their shelf. Supply is dropping, that's the squeeze play the raises China's ire.

Paul E. Math's picture

Okay, I acknowledge that this is monetization, pure and simple.

But $24M is not even pocket change, not even lint.  So why is this a big deal?

I don't understand why the Fed bothers and, at the same time, why is this significant to us?

Cognitive Dissonance's picture

You need to read more than the headline.

Today, Brian Sack just completed a $2.2 billion POMO focusing on bonds in the 17-30 bucket....

The $24 was just the small portion that was directed towards the 30 year. Reading is FUNdamental.

Paul E. Math's picture

Not trying to be argumentative - I'm still not getting it. 

They do POMO of this size just about every week, don't they?  Honestly, what is new here?

I agree that this is all monetization by another name but this particular action doesn't seem different from last month.

Cognitive Dissonance's picture

They are doing this size or bigger every day for the last 7 days and will be doing it every other day for the foreseeable future.

It might make sense to read the articles here on ZH.

Paul E. Math's picture

The article states: "What is most notable is that the last bond on the accepted list (highlighted below), of which the Fed monetized $24 million worth, is CUSIP QL5: the 30 Year bond auctioned off last week."

I took this to mean that the point of this article was to identify how soon after the 30-year was issued that the Fed purchased it.  It makes the monetization pretty direct when PDs don't even hold them long enough for the ink to dry.

While this is a valid point, it occurs to me that $24M is a de minimus amount.

I think this blog is right to be critical of the monetization but it somewhat undermines the argument when the amounts are very small.

I'm just going to ignore your condescension since I think that undermines the whole point of these discussions which, for my part, is knowledge, enlightenment and, ultimately, freedom.

Yancey Ward's picture

I was having the same response- $24 million is less than a half a percent of the 30Y issued last week.  Now, if they step this up next week, and, let's say, buy the entire issue by the time of the next 30Y auction, then you would have something to talk about.

jus_lite_reading's picture

I love this:


"We have too much private debt in the case of Ireland," according to Nouriel Roubini.

But the nub of the crisis is this: "We have decided to socialize the private losses of the banking system. Now you have a huge increase in public debt-going from 7 percent to 100 percent of GDP. Soon it will be 120 percent."

And, turning more broadly to the rest of Europe, "Greece is already at 120 percent."

Roubini believes that further attempts at intervention have only increased the magnitude of the problems with sovereign debt. He says, "Now you have a bunch of super sovereigns- the IMF, the EU, the eurozone-bailing out these sovereigns."

Essentially, the super-sovereigns underwrite sovereign debt-increasing the scale and concentrating the problems.

Roubini characterizes super-sovereign intervention as merely kicking the can down the road.

He says wryly: "There's not going to be anyone coming from Mars or the moon to bail out the IMF or the Eurozone."

But, despite the paper shuffling of debt at the national level-and at the level of supranational entities-reality ultimately intervenes: "So at some point you need restructuring. At some point you need the creditors of the banks to take a hit -otherwise you put all this debt on the balance sheet of government. And then you break the back of government-and then government is insolvent."

And then there is the case of France. "Sarkozy came to power saying 'I'm going to do lots of reform.' He has not done it. Right now, he is weak. He might lose the election. And, therefore, they are going to delay fiscal austerity and reforms."

And that, according to Roubini, is a major problem for the fiscally challenged French.

The bond vigilantes may have woken up first in Greece, Ireland, and Portugal. "But France," Roubini says, "does not look much better than the periphery."

In Roubini's view, the probability of the right steps being taken in France soon is not great. "Politically they are constrained from making reforms." For example, after the French made relatively small changes in their social welfare system-raising the retirement age from 60 to 62 -"You had massive riots in the streets."

And that, in Roubini's view, was just the beginning of the necessary austerity.

"What's going to happen when you do more radical reform? That's an open question in the case of France."

Looking beyond France to the future trajectory of the crisis, Roubini says, "The next one in line is going to be Portugal. "Due to the severity of Portuguese debt problems, Portugal is going to lose market access-and that means they are going to require IMF support as well.

But the real nightmare domino is Spain. Roubini refers to the Spanish debt problems as "the elephant in the room".

"You can try to ring fence Spain. And you can essentially try to provide financing officially to Ireland, Portugal, and Greece for three years. Leave them out of the market. Maybe restructure their debt down the line."

"But if Spain falls off the cliff, there is not enough official money in this envelope of European resources to bail out Spain. Spain is too big to fail on one side-and also too big to be bailed out."

With Spain, the first problem is the size of its public debt: €1 trillion. (Greece, by contrast, has €300 of public debt.) Spain also has €1 trillion in private foreign liabilities.

And for problems of that magnitude, there simply are not enough resources-governmental or super-sovereign-to go around.


Anyone up for a game of chicken? The stakes are global world war or mutually assured destruction. Your choice.

Fraud-Esq's picture

"We have decided to socialize the private losses of the banking system. Now you have a huge increase in public debt-going from 7 percent to 100 percent of GDP. Soon it will be 120 percent."

Funny. What does QE2 do to add to the debt compared to the bank asset-bailouts? It's as if people have just skipped over the EPIC ACTION and are very distracted by Treasury purchases, IHMO. 

The real war is back about five steps on another page. We need to unwind what we've done for the banks OR make the banks contribute more to the taxpayers in return. NEITHER is being discussed because the ABA-Media isn't discussing it. The economists, like Roubini, feel they already lost that battle for the methodology of bailout and just moved on. Those taking aim at the treasury buys and shelving the conversation about bank asset-bailouts v. taxpayer return are playing into the hands of the bank lobby, IMHO.  

Racer's picture

Bernanke accused China of currency intervention..

the greatest manipulator the world has ever seen says that!

Fraud-Esq's picture

Those accusations aren't mutually exclusive. The Bernank's subtext is: "BECAUSE you have manipulate your currency for a LONG TIME and created structural imbalances, we must manipulate in return."

I honestly don't see why he's not allowed that logic. I don't have to agree with it. But, it is logical and explains causation.  

ATM's picture

The Ben Bernenk is not allowed to steal arbitrarily from every citizen by turning on the printing press - China manipulator or not.

If China is a manipulator we can simply deal with that through product tarriffs on omports thus raising the costs of Chinese products in the US. Trade imbalance solved without debasing the currency and the wealth of very saver.

In case I missed something, the Fed is not empowered to debase the currency but as the agent of the US Congress that has the power to regulate the value of our money and foreign money.

Perhaps in some sort of odd way they are regulating the value of money if by regulating you mean a steady shit into the toilet. 

The Ben Bernenk does have a nice beard.

youngman's picture

And think of all the fees people will get fot the selling and re-buying of this....why not just do it in house....oh thats right..they have to hide it from the people.....lol

MrTrader's picture


slaughterer's picture

With regard to China and US currency manipulation, it is sort of like a child's argument at this point: "But he did it first!"

the rookie cynic's picture

Hey guys, I lost my CUSIP somewhere, anybody seen it?





watt's picture

Counterfeiters get 30 years in the UK - except those working for the Bank of England