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Fed's Total 2-10 Year UST Monetization Over Next 12 Months: $340 Billion
BofA's Jeffrey Rosenberg provides the breakdown of the total amount of securities that roll off (MBS, Agency and USTs) over the next 12 months: the total is $340 billion, including the $230 billion (and possibly more) in MBS. Alas, this means that on a straight line monthly basis (and the finally outcome will likely be far more jagged), there will be on average just under $30 billion a month in incremental 2-10 Year Treasury Purchases. As Joseph Abate said earlier, this is not nearly enough to be considered a new stimulus, and at best seeks to retain the status quo. What is notable is that BofA believes today's action should have been priced into the market. Judging by the kneejerk reaction in stocks and bonds, the reality is anything but.
From Jeffrey Rosenberg:
We would distinguish between an expansion of quantitative easing – QE2 – and an extension of QE1. The latter is more likely and in our view largely factored into credit market asset prices over the past few weeks. Extending the existing QE program means reinvesting paydowns and maturities. That simply postpones the implicit tightening of monetary policy from letting these paydowns roll off. Declining Treasury rates and the higher refinanceablity of the Fed’s mortgage holdings lead to a potential of $230bn of paydowns over the next twelve months on top of the already slated nearly $60 and $50 bn of Treasury and Agency debt maturing over the same time period. Left uninvested, that total amounts to $340bn, or nearly 20% of the portfolio purchases.
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Thank you, FASB 157! We have money to burn, bitchez!!!!
Looks like the Fed is cutting the diminishing supply of Viagra into quarters to keep the er....... eruptions down to a minimum. Of course, everything changes the day after the elections. Of course.
I hope the Fed's ole lady is too disappointed in the (lack of) results for the next few months.
If your raging inflation continues for more than four quarters, please consult a physician.
Great avatar!
Fed mentioned nothing about maturing securities, only reinvesting principal payments from Agency and Agency MBS. The Fed already replaces Treas & Agency by purchasing directly from the issuer at auction, pursuant to the Reserve Act. So, you can wipe all but $6.0 billion (actual principal payments over the next year) from that $46.9 billion in Agencies and get rid of the $62.4 billion in Treas entirely. Based on current interest rates, MBS principal payments would be $170.9 billion over the next year, so my total is $176.9 or half Rosenberg's. Not much, though I do look forward to reading the word POMO again.
I know what you're thinking. "Did we fire six shots or only five?" Well, to tell you the truth, in all this excitement we kind of lost track ourselves. But being as this is the Federal Reserve, the most powerful central bank in the world, and would blow your head clean off, you've got to ask yourself one question: Do I feel lucky? Well, do ya, punk?
Nope.
Actually 5 because the default ratio underlying the average MBS is more like 1/6.
Out of bullets... it's time to throw the gun.
a great line from a great actor in a great movie - and your adaption for the circumstances gave me a big ole fashion cheek ta cheek smile ..... thanks!
Using the BLS birth-death mathematical model, I figure your five shots is actually 11.5 shots. So, Dirty Harry, I ain't afraid of you. I'm walking straight to you now. I'm gonna grab your gun and pistol whip you til you cry "Momma". [Fade to black]
So the shit sandwich is something like 70% bigger than originally thought?
Swell.
There are brown shoots [sic] breaking out all over.
Idiocy up - dollar down.
Maybe I'm reading the charts wrong, but the dollar is up against every currency on the board:
http://netdania.com/products/live-streaming-currency-rates-foreign-exchange/real-time-quotes/QuoteList.aspx
The masters of manipulation?
in long term, dude
Can't wait to hear China's statement...much less their reaction.
So oblama and the decepticons can promote the agency refis and that will allow the fed to purchase more treasuries from the banks? It's cool. Everyone can get paid in this circle jerk.
all the latest stimulus, now QE....does nothing but maintain the status quo. it does nothing to boost sales, jobs, etc..
instead of kicking the can to 2011, they've kicked it to tomorrow.
LMAO!
Exactly, this isn't QE2 or QELite, it's a squirrel fart in a hurricane.
I suppose they can pay themselves interest as well.
And taxes.
I don't quite get it, is it 340 bln like BofA says in this chart or is it 200 bln $?
"priced into the market" hahahahahaha!
as if the markets are priced by investors and not "THE BOT"
gimme a break
everything is exactly where the globalist bankster crooks want it all to be
stocks, yield curve, commodities, everything
Hell yes.
Had a good chuckle at that idiotic phrase as well.
Unlike Atlantis... We Will Drown In a Ocean of Monetary Base...
Extra ZIRPy
Ummmm, w/ MBS isn't there an issue with P/L due to toxicity?? In other words, the MBS's were mispriced and no paydown due to defaults etc... Aren't these losers for the FED P/L which remains on the BS?
Humm, yes., seems they are playing both sides. When these were bought - at parity - that money went into the system - at parity. When they are exchanged for treasuries - at parity - that money Will go into the system - at parity.
So...to close out the accounts the Fed has to create money out of thin air to cover the losses...and I might be wrong here...but the Fed does not have the authority to print out of thin air - exchange FRNs for treasuries,yes, but not just make FRNs - out of thin air - to cover their losses. That is up to the Treasury.
Someone more versed on "legal" monetary policy please chime in. If the Fed just trades parity for parity when losses obviously occurred. I'm thinking that is (was) illegal.
You think the Fed had the legal authority to bail out AIG? Or buy shit paper from Freddie/Fannie?
What makes you think they need legal authority to do anything in this Wild West environment?
Requesting specific statues, not rhetoric.
Realized after I posted this it was a waste of my time. All of the folks who could answer this question left this blog 6 months ago
Any idea where they went?
Yeah, but I ain't saying where. This blog got a solid 6 months before the hoi polli chased the traders & analysts out. That's several more months than most blogs get & I assume that's because ZH doesn't dumb down it's commentary, but you have to do your own leg work to find the next one.
Hey, TD how about a paid site, with exactly the same concent, just a cover charge to keep the penny stinkers out?
Anyone notice that while TNX bounced slightly off 2.75 before it closed, TYX shot back up when it was announced that the FED would concentrate on 2s through 10s? LOL.
Poor long bond. If the Fed doesn't want you, nobody does.
Buyer of last resort indeed.
I asked this some time ago on one of Leo's threads, I believe, in the context of QE:
Does anyone have an example in all of human history where debt monetization has actually worked? I can't think of one, but I can name many, many counterexamples.
Bernanke: "Ye of little faith. There's always a FIRST time for everything to work." :)
Exactly, he thinks the last country that did this just did it wrong Ben knows how to do it right and better than the last guy or country. Seems like communism
any chance that today's policy is an admission of ineffectiveness? What are the chances that QE2 never happens?
Zero. Following the deaths of legends Bob Hope and Johnny Cash, the US now has no hope and no cash. Sell the USD...
I don't see how you get a sustainable stock rally off of this hit off the QE crack pipe like you did the last one.
I just want to grow up to be, to be a Debaser...
I guess Ben doesn't want the Dems to keep the majority. I love the squirt gun pulled today.
Quote from Jeffrey Rosenberg is spot on, this is not QE2.0 at all. Stocks are a sell unless you think we're at an equilibrium now.
Did Fed just give their seal of approval for Double Dip? They probably cannot launch QE2.0 without a very good reason. DD would be one.
My gut feeling is that Bernanke doesn't want to launch any sort of QE 2. I think he would like the politicians to get moving with some sort of meaningful action. I got high for the first time in many years on the week end and suddenly thought about Bernanke in a totaly different light. I always read zero hedge for my economic news so I am used to thinking about him as the enemy but when I thought back about the things he has said recently I am not so sure. He recently has asked (in his polite way) that the government do something meaningful about the defecit and to do something about unemployment. I think he has been trying to speak truth to power.I think he will do his best to keep the economy functional but I do not think he wishes to take action.
I think if the markets are being gamed to cause QE2 it is more likely the banks are freelancing. That's just my opionion and it shouldn't take too long to get junked out for it.
SCHOOLS OUT
http://williambanzai7.blogspot.com/2010/08/schools-out-for-benny.html
hi?can you send the original report to susiesss910@gmail.com thanks a lot !
Pack your parachutes for tomorrow. So much red out there, I need to make some cherry koolaid.
Pac-man is about to fall down the tempest-chasm and de-rez in a poof of pixels.
Fed mentioned nothing about maturing securities, only reinvesting principal payments from Agency and Agency MBS. The Fed already replaces Treas & Agency by purchasing directly from the issuer at auction, pursuant to the Reserve Act. So, you can wipe all but $6.0 billion (actual principal payments over the next year) from that $46.9 billion in Agencies and get rid of the $62.4 billion in Treas entirely. Based on current interest rates, MBS principal payments would be $170.9 billion over the next year, so my total is $176.9 or half Rosenberg's. Not much, though I do look forward to reading the word POMO again.
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