"Flip That Bond" Fed Monetizes 50% Of Primary Dealer Bid From Last Wednesday's 7 Year Auction

Tyler Durden's picture

Grotesque, meet tragicomic. In today's POMO the biggest CUSIP monetized was QB9, of which the Fed purchased $5.99 billion (of a total $8.03 billion). And here's the kicker: when we commented on last week's 7 Year auction we once again were rather prophetic: "Altogether a weak auction but it's not like the PDs would let it fail
especially not with QB9 becoming the next "flip back to the Fed" bond
for the PD community.
" And tadaa: today, the Fed bought back 50% (!) of the Primary Dealer take down ($12.115 billion) of last Wednesday's (yes that would be the QB9) auction. This is probably the fastest episode Flip That Bond on record. Anything else and the Fed would be monetizing bonds that had not yet settled.


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plocequ1's picture

Oh well, If the math allows them to do it, What the fuck. Go for it.

covert's picture

so, what are you gonna do to fix it?



Thomas's picture

And the talking heads will rave about the bid-to-cover.

SwingForce's picture

If Obama wants to let the banks screw up his chance of re-election, go ahead! The only thing people care about is a job and the value of their home. Obismal Failure on both counts. Oh, but go right on shoveling money into the furnace, we have no idea who will pay it back, but WTF? Hey where's my $1Billion in campaign funds?

sbenard's picture

I would say "Obamasmal" Failure!

Ancona's picture

I wonder how long before the rest of the planet tells the US to stick their bonds directly up Bernanke's ass?

LibertyIn2010's picture

The rest of the world is already in the process of telling the US exactly that.  It's just that the mainstream media in the US won't be covering that story until the US$ actually collapses.  The rest of the world no longer wants to hold our worthless $$$ which is why we're over in the MENA trying to secure our future oil supply under the false pretense of "spreading democracy". 

Pepe's picture

How true. Look at this brief from the NYT:Security experts fear Al Qaeda in the Islamic Maghreb has turned a corner in becoming a greater security threat.

ibjamming's picture

Bingo...they've already stopped buying them...now WE buy our own debt.


Gotta keep that oil in dollars though.  It's our ONLY hope.  Free money coming out of the ground...it sure spoiled us!

lieutenantjohnchard's picture

you have to assume the 1% of the usa that owns 1/2 the wealth know the situation as described. so who exactly does the fed think they fool given that the public by and large doesn't have any skin in the game?

ghostfaceinvestah's picture

They are fooling the public.  Their money printing is bailing out the banks at the expense of commodity inflation, meaning the masses pay indirectly for bailing out the banks.  But the masses are too stupid to realize it, and instead buy the line that "global economic recovery is driving commodity prices".

Joe Public has no idea why, with real unemployment in the high teens, gas at the pump is $4 a gallon.

Joe Public's standard of living is the game, and he is losing at an increasing rate.

lieutenantjohnchard's picture

i understand your points and agree with them 100%. i don't think i expressed my question right. i'm going to think about it a little while and see if i can come up with a better thought.

ghostfaceinvestah's picture

I know you get it, your point was probably that no one knows or understands the mechanism of this theft.  I just don't think the mechanism matters.  If it wasn't QE/POMO it would be something else.  In fact I think the MBS purchases were far, far worse, as that market is much less transparent so the Fed was able to overpay much, much more.

Another insidious mechanism was the FDIC bank debt guarantees.  Underpricing insurance is a classic means of thievery that the government excercises frequently.

Bottom line is the Fed is printing money to cover banks' credit losses, and we are all paying.  The mechanisms to achieve this goal are many.

Boston's picture

Speaking of stupid masses, I just walked out of a BAC branch, in an upscale town that happens to be about 4 miles from where Brian Moynihan (CEO of BAC) lives.

When I saw the CD rate sheet offering 1.19% yields on 10 year CD's, I asked to speak with a manager.  I asked her why would anyone in their right mind buy a "CD" yielding almost 2/3 LESS than a comparable Treasury.

Her answer:  Some our customers prefer the "safety" of the CD product.  When I reminded her that the CD is offered by a TBTF bank that pretty much failed in late '08, she smirked and explained to me that the US government wasn't such a safe place to put ones money either, as if somehow BAC could provide a safe alternative to T-Notes.

There was no reasoning with her.  And this is in a town that's filled with highly educated folks (rated number 2 or 3 in MA for percentage of residents with graduate degrees).






glenlloyd's picture

perhaps the education they received wasn't worth the money they spent on it.

steelhead23's picture



Yes indeedy, they are fooling the public.  Not only do they blame phantom global growth for the recent explosion in commodities, there are folks out there blaming the rise in commodities on those e-vil speculators.  I thus caution my more militant friends on this blog.  You know that mob you'd like to see visit the banksters?  Beware, they just as well may come for US.

umop episdn's picture

I hope no electrons were harmed in that transaction--too bad about the QSA-ians.

Alcoholic Native American's picture

Tax revenues don't matter


****Evil dick Cheney smile****

slaughterer's picture

ZH has yet to provide the total "commish" for the PDs on that flip. 

Tyler Durden's picture

Full costs to Fed are announced only at the end of any given monthly schedule

slaughterer's picture

What would be the estimated costs to Fed for this particular auction based on previous schedules? 

Tyler Durden's picture

Large to quite large. All are purely based on difference between reverse dutch auction offer and subsequent price.

disabledvet's picture

i like where you're going with this tho!  "is there bonus pool for POMO?"  try that "betting game"!

sbenard's picture

This forum is always good for a few laughs. Thanks again, ZHers!

If not for those laughs, I'd be crying for this country around the clock!

Okay, I'm still crying, but at least some of them are tears of laughter instead of tears of dread!

asteroids's picture

The end of POMO is near. It really isn't effective anymore and the PD's with the FED's approval are milking it for all its worth. What scum.

slaughterer's picture

Wouldn't you milk it, if your book was still hiding massive amounts of toxic waste that will likely not increase in value for a long time, if ever?

FLIP THAT BOND's picture

Blame it on the weather.

dasein211's picture

If and when Pomo ends how long until interest rates start moonshooting?If they can't even wait a goddamned week we have days before this cluterfuck goes critical as soon as Pomo ends. And if they decide to emergency this shit as soon as it's over then they willbury the dollar! They have to know this! Right...?

EHoofnagle's picture

How much in commisions do Primary Dealers make selling a billion face of bonds back to the Fed?

Bansters-in-my- feces's picture

There must be a strong enough rope ,that would hold Bernanke by the neck until dead,somewhere in your country.

If not just ask,I'll get you's all one sent down.

Dan The Man's picture

when do they become Zimbamerica ?

glenlloyd's picture

you're suggesting we already aren't?

PulauHantu29's picture

I guess this means another record high year of Bonuses for Wall Street Bankers.

Johnny Lawrence's picture

So the bonds were on the PDs books for 3 business days?  This has to be a joke.

thames222's picture

The more the Fed monetizes anything, the more we're screwed.  Last night's resolution didn't do anything towards a long-term fix, just a band-aid to convince everyone that it's ok to trade.