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Fed Monetizes $8.2 Billion In Bonds Due 2018-2020
Another day, another POMO. Today Brian Sack bought up $8.2 billion in various CUSIPs maturing between 2018 and 2020, with the issue accepted the most ($2.3 billion) being 10Y LJ7, issued last September. As all of the recently auctioned off 10 Years are now trading at lower prices than where auctioned, not surprisingly neither the NT3 nor the ND8 had any buyback submissions as PDs would be underwater on the buyback. The total submitted to accepted ratio was 3.7x, lower than median and generally indicative of spare dry powder at the primary dealers. And so the PDs make another few hundred million courtesy of commissions and par-market differentials. Aside from that, nothing else to see. Market focused on closing tick to see if POMO has now become a curse instead of a blessing.
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POMO having no effect on the equity markets - perhaps China is dumping Treasurys faster than the Fed can buy them.
Thats what I think is going on. Bernanke absorbing all the Chinese bonds putting it all on the backs of taxpayers and using the rest of POMO to short PM's.
After all, what does it really mean 'buying our own debt'...have to be buying it FROM someone then, has to be China.
Then China goes out and buys gold.
Hmmm.... maybe POMOs aren't so bad, after all?
Well if youre China, I guess POMO's are great! For the US worker taxpayer peasantry class? Definitely not so much.
250 trading days X $8.3 billion = $2.075 Trillion.
After "GM" POMO will be no longer viewed as either necessary,
nor of ANY impact to the markets! Moreover I think the FEDs will
have to "pull back", for "political reason"!! My humble take is,
the market will roll over, between now and Dec15! Taxation will be
the "Achilles Heel" for the market, SellOff @ 15%-20%!!! Not 30%!!
Europeans have much less balls then we have to call it quits! That shill game
will take a little longer before they "can(n) no more"!
Excellent!!, "Observation(s)"!! ("!!")
!
Chart: ES and ZB
"Got my mojo working but it just don't work on you."
http://99ercharts.blogspot.com/2010/11/es-zb_17.html
http://www.zerohedge.com/forum/99er-charts
http://www.youtube.com/watch?v=V25iA2XPzuA
Looks like they are ramping on the news....
"As all of the recently auctioned off 10 Years are now trading at lower prices than where auctioned, not surprisingly neither the NT3 nor the ND8 had any buyback submissions as PDs would be underwater on the buyback."
Somebody more astute please explain:
1. Doesn't the FED buy back at par?
2. Why would the PDs take a loss if they submitted these currently-lower priced CUSIPs? Wouldn't the FED be willing to pay more than any other potential buyer?
Appreciate any coherent explanation.
I am no expert. But what doesnt make sense to me is the FED is buying treasuries at record low interest rates (i.e. exchanging FRNs for gov backed paper). If the FED does not buy, interest rates will go up. If they continue to buy, they inflate and interest rates will very likely go up. Once interest rates rise, no one will buy the low interest rate treasuries the FED owns, unless deeply discounted (loss for FED and will keep monetary base high). Seems to me the FED is playing roulette. Without QE2, interest rates were going up due to no treasury buyers. With QE2, there is a high possibility rates are going up. They chose QE2 since it offered the possiblity of higher interest rates rather than the sure thing. Back to "Dumb and Dumber", "more like one in a million....So you are saying there is a chance!?!?"
The FED keeps ante-ing up the pot while holding a pair of 2's at best!
I think that is the best analogy. They are hoping to bluff their way to end.
1. From what I understand, the Fed does not pay par, they roughly pay market prices. The dealers submit their 'offers' to the Fed, and the Fed decides what to purchase. A reverse auction? The Fed has been purchasing some previously issued securities at above par, since interest rates have declined until recently.
2. Yields have risen as of late, therefore some recently issued bonds are under-water price-wise. The Fed is willing to pay more then other buyers, but not substantially more. More relevantly, there was a ZH article recently that argued the Fed was intentionally purchasing off-the-run bonds, which typically have wider spreads - meaning the Fed purchased 'less-liquid' bonds and was able to give the dealers a fatter 'spread' on their arb of POMO.
Just my thoughts...
The USD/JPY has turned. It looks very much like this mornings manipu....I mean sell down on the dollar is not working....
Of course, REITS are defying gravity again. Guess where the POMO went today?
REITs = (1/housing market) - corrugated paper
Folks gotta live somewhere.
Folks are going to live in strip malls and office buildings?
Who do you think owns most of those big apartment complexes?
http://www.time.com/time/business/article/0,8599,2013302,00.html
$8B is now just enough to maintain -- the addict needs some stronger shit for a good high.
Not much happening. All being saved up for the big IPO?
Big IPO and something of a resolution in Ireland. Once we get that bailout reported, market will rocket higher and the IPO will stir the "animal spirits" with buyers flocking in and feeling good just in time for the holiday shopping season.
Let's see, in the midst of a crappy economy GM reports their largest quarterly profit in 11 years -- right before the IPO. The shares will have to trade north of $70 for U.S. taxpayers to get even on the bailout money already dumped into this bloated carcass.
No problem, it's an earnings Cinderella story if I ever saw one.
You'd HAVE to be a dumb crazy animal to flock in and buy GM IPO! I'll laugh like mad if and when this stupid IPO faceplants shortly.
The stock, like the company, is too big to fail, and all that entails.
by HarryWanger
on Tue, 11/16/2010 - 11:29
#731069
Retail looks strong again - and it should on the heels of yesterday's Retail Sales number and what we're seeing in retail earnings report.IP was pretty decent on the manufacturing component. This looks like a trap here. My guess is we see a strong turn around here today to continue the market run. Ireland is officially off the tabel now until Spring 2011. That should help open the trap door on the bears here as well.
by HarryWangeron Tue, 11/16/2010 - 14:50
#731930
1175 SPX was tested 3 times and each attempt failed. We are heading into the last hour, so all systems should be go to rally from here.
by HarryWangeron Tue, 11/16/2010 - 15:40
#732161
As long as we keep these key support levels on SPX and AAPL - we're good. And, as they hold, it sets up the snap back rally. My timing is off a bit thrown by the EU conference being delayed but once that is settled, it'll rally big.
by HarryWangeron Tue, 11/16/2010 - 15:54
#732215
This dog and pony show will also help the markets as it proves to be nothing more than what it is.Ireland news never really materialized into anything today. All key support levels on SPX, AAPL and DOW all held strong today. Tells me we're looking at a pretty strong market day tomorrow.
+1 lmfao
Chart: NQ
Com'on Ben...$8.2 billion!
http://99ercharts.blogspot.com/2010/11/nq_17.html
http://www.zerohedge.com/forum/99er-charts
Would that be called "long term bonds"?
More like long term bondage
How much dry powder does Brian have now including 24 x leverage
This POMO thing....
...it's not working so well.
Bring it on. (edit: damn, the chart isn't showing.)