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Fed Monetizes $2.7 Billion Worth Of ~5 Year Bonds, Submitted-Accepted Ratio Drops To 5.8x
Today, the Fed monetized $2.708 billion as part of its ongoing POMO monetization operations, to inject the market with a daily dose of liquidity and keep stocks higher. The biggest issue repurchased was the 2.625% of 12/31/14, followed by the 2.375% of 3/31/16, once again confirming that the Fed prefers buying the cheapest issues on the curve spline. Surprisingly, the Submitted/Accepted ratio came at a very low 5.8x: it appears few were as excited by today's monetization as those of prior weeks, when this would come well in the double digit range. And now that the liquidity injection is complete, and the mini ramp post 11am is done, we have to look forward to today's 1 PM auction of $33 billion in 3 Years, which will likely soak up all the non-risk allocatable funds held by the Primary Dealers. Also, the most recently monetized tranche was the 5 Year MH0 as of January 27, 2010.
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Monetize, bitchez
Better Still, here is an idea:
The US Treasury MUST TAX the Federal Reserve on their transactions by a mere and very small 0.5%. This is a very low tax and far less than US citizens pay for taxes on various products. This added US Federal Reserve Debt Note (US Dollar) product tax on the Federal Reserve will be used to pay down the US debt and finance the country. Either that or go back to the Constitution and have the Treasury issue money and thus avoiding the Federal Reserve's demanded interest payments from the Treasury.
If the Federal Reserve wants to make the Treasury pay tax, then the Federal Reserve must pay taxes to the USA's Treasury on their transactions like those done with other off-shore central banks if they want to acquire the US-based product called the Dollar.
95% of the Federal Reserve benefits go back to Treasury.
So basically all this bad news about the economy, The Euro, Unemployment is all resolved with the breath of Bernankes nostrils. The only other entity with this kind of power is the Lord God himself. All praise the lord Thy Bernanke. I'm convinced it was Bernanke who parted the Red Sea.
What happened to "we are not going to monetize the debt"? Aren't we supposed to simply trust our central bankers?
/sarcasm
That statement refers to the entire debt, pieces don't count.
Why don't they just monetize 10000quadrillion and get it over with already
I can't seem to find a schedule for this crap. Anybody got a link.
http://www.newyorkfed.org/markets/tot_operation_schedule.html
Thanks Rich,
I looked at their site but must have missed it.
I don't like defending the Fed but what we are seeing presently is not monetization. Monetization means spending newly created money. There can't be monetization without an expansion of the monetary base.
As of Aug. 11, the day after the Fed announced the reinvestment plan, the monetary base was $1,997 billion. As of Aug. 25, the latest data, the monetary base was $1,995 billion, that is down by $2 billion.
Besides, as of Aug. 11 the Fed had $777 billion of Treasuries and $1,279 billion of mortgage debt; as of Sept. 1 the Fed has $786 billion of Treasuries and $1,260 billion of mortgage debt. The Fed's Treasuries purchases lagged roll-off of mortgage debt by $10 billion, and so Fed securities holdings were a net drag on the monetary base, not a boost.
DOW/S&P500/FTSE/EURO short signal continues :
http://stockmarket618.wordpress.com
Nice article thanks.
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