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"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.

Sigh:

 


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Mon, 04/04/2011 - 11:22 | Link to Comment plocequ1
plocequ1's picture

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

Mon, 04/04/2011 - 12:34 | Link to Comment covert
covert's picture

so, what are you gonna do to fix it?

http://covert2.wordpress.com

 

Mon, 04/04/2011 - 11:23 | Link to Comment Thomas
Thomas's picture

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

Mon, 04/04/2011 - 11:24 | Link to Comment SwingForce
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?

Mon, 04/04/2011 - 11:49 | Link to Comment sbenard
sbenard's picture

I would say "Obamasmal" Failure!

Mon, 04/04/2011 - 11:26 | Link to Comment Ancona
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?

Mon, 04/04/2011 - 11:53 | Link to Comment LibertyIn2010
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". 

Mon, 04/04/2011 - 12:04 | Link to Comment Pepe
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.

Mon, 04/04/2011 - 12:22 | Link to Comment r101958
r101958's picture

Very well said!

Mon, 04/04/2011 - 14:53 | Link to Comment ibjamming
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!

Mon, 04/04/2011 - 11:30 | Link to Comment lieutenantjohnchard
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?

Mon, 04/04/2011 - 11:46 | Link to Comment ghostfaceinvestah
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.

Mon, 04/04/2011 - 12:05 | Link to Comment lieutenantjohnchard
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.

Mon, 04/04/2011 - 12:37 | Link to Comment ghostfaceinvestah
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.

Mon, 04/04/2011 - 12:59 | Link to Comment Boston
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).

Yikes!

 

 

 

 

Mon, 04/04/2011 - 13:28 | Link to Comment glenlloyd
glenlloyd's picture

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

Mon, 04/04/2011 - 18:01 | Link to Comment steelhead23
steelhead23's picture

http://www.dailyfinance.com/story/the-real-reason-gas-prices-are-soaring/19893347/

http://blogs.wsj.com/economics/2011/04/04/fed-not-to-blame-for-rising-commodity-prices-paper-argues/

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.

Mon, 04/04/2011 - 11:33 | Link to Comment T Rex
Mon, 04/04/2011 - 11:43 | Link to Comment umop episdn
umop episdn's picture

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

Mon, 04/04/2011 - 11:45 | Link to Comment Alcoholic Nativ...
Alcoholic Native American's picture

Tax revenues don't matter

 

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

Mon, 04/04/2011 - 11:48 | Link to Comment slaughterer
slaughterer's picture

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

Mon, 04/04/2011 - 11:50 | Link to Comment Tyler Durden
Tyler Durden's picture

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

Mon, 04/04/2011 - 11:52 | Link to Comment slaughterer
slaughterer's picture

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

Mon, 04/04/2011 - 11:56 | Link to Comment Tyler Durden
Tyler Durden's picture

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

Mon, 04/04/2011 - 11:53 | Link to Comment disabledvet
disabledvet's picture

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

Mon, 04/04/2011 - 11:57 | Link to Comment sbenard
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!

Mon, 04/04/2011 - 11:53 | Link to Comment asteroids
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.

Mon, 04/04/2011 - 12:00 | Link to Comment slaughterer
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?

Mon, 04/04/2011 - 11:59 | Link to Comment FLIP THAT BOND
FLIP THAT BOND's picture

Blame it on the weather.

Mon, 04/04/2011 - 12:02 | Link to Comment dasein211
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...?

Mon, 04/04/2011 - 12:07 | Link to Comment HubbleBubbleBen...
HubbleBubbleBenLovesTrouble's picture

Yesssss, we cannnn!!!

Mon, 04/04/2011 - 12:38 | Link to Comment EHoofnagle
EHoofnagle's picture

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

Mon, 04/04/2011 - 12:44 | Link to Comment Bansters-in-my-...
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.

Mon, 04/04/2011 - 13:20 | Link to Comment Dan The Man
Dan The Man's picture

when do they become Zimbamerica ?

Mon, 04/04/2011 - 13:28 | Link to Comment glenlloyd
glenlloyd's picture

you're suggesting we already aren't?

Mon, 04/04/2011 - 14:48 | Link to Comment PulauHantu29
PulauHantu29's picture

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

Mon, 04/04/2011 - 15:31 | Link to Comment Johnny Lawrence
Johnny Lawrence's picture

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

Sat, 04/09/2011 - 22:21 | Link to Comment thames222
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.

 

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