Further QE3 Composition Hints As PIMCO Raises MBS Holdings To One And A Half Year High

Tyler Durden's picture

PIMCO, that tried and true client of Fed "expert network" Larry Meyer who just loves 'hinting' at what the Fed will be doing in the next 3-6 months in exchange for a modest retainer, has just released the December composition of its flagship Total Return Fund. Despite declining for a second month in a row, from $250 billion to $240.7 billion, the world's largest bond fund has once again increased its MBS holdings, this time from 43% to 45%. Keep in mind this was at 18% in July, and in the meantime Bill Gross has gone from $5 billion in net cash to $17 billion on margin. It is obvious that Gross, who already has a major position in municipal debt, and will thus benefit from the imminent state and muni bail outs, also believes that once the Fed is content with having sacrificed 100 bps in the rates to generate 10% in the S&P, will soon be forced back into the mortgage market, and will be buying MBS once again. Based on Gross' ongoing accumulation of MBS, we are now fairly confident that the "expansion" to QE2 (really, QE3 but who keeps count) to be announced sometime in May, will contain Treasurys, Municipal bonds and Mortgage Backed Securities among the asset permitted for purchasing. Unlike the BOJ, we don't think the Fed will announce ETF purchases yet. That will be reserved for QE4, to be announced some time in early 2012.

Total TRF holdings:

And duration distribution: the fund's holdings in the 3-5 Year space have surged to a whopping 50% of total, a total last seen in November 2008 just as QE1 was being disclosed.

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vote_libertarian_party's picture

welp...no reaction from MUB yet. 

LowProfile's picture

You'll know they're buying munis when MUB gets a bid.

Sutton's picture

Bill's facelift is finally loosening up. It is better than Chanos'.


nonclaim's picture

They really are out to destroy wealth, *your* hard worked wealth. They won't stop until they get the last middle-class honest person into the "unemployed benefits" line. Just before they turn it off...

How long till we go back to bartering physical goods?

sbenard's picture

Are you sure it's not QE 3,000,000,000,000?

Caviar Emptor's picture

2008: Fed leads massive globally coordinated financial rescue. We must all cooperate to save the planet. We are all sisters under the skin. Let the money printing begin.

2011: Fed kicks all partners in the nuts and exports inflation to save its own failed policies from crumbling into oblivion. Even Anglo countries get hit. Riots begin to break out. Inflation gets reimported via rising commodity costs and import prices. Costs can't be adequately passed on.

onlymyopinion's picture

Along with the strengthening recovery, strong earnings/outlooks, future QE's just makes the icing on the cake that much sweeter if you're long this market.  Will remain 70% long and continue to buy the dips. 

SheepDog-One's picture

Wow has Zerohedge wheeled out yet another shit pot stirring equity perma bull? 

onlymyopinion's picture

No permabull here...just riding the current trend.  Although I almost became a permabear back in 07/08.  Can't get too greedy either way.  I do however believe the current uptrend is going to get the DOW & Snps back to ATH by EOY2012.  JMVHO

HarryWanger's picture

Sure would be nice to end the week at a neat and tidy 1300 SPX with a holiday on Monday.

onlymyopinion's picture

Would be, but think it's still a week away (1304), then a move to 1340.  Not sure if we'll tag 1340 by the end of earnings but should by the May showers. 

sbenard's picture

Are you sure it's not QE 3,000,000,000,000?

SheepDog-One's picture

Q/E3, I still dont believe it. But hey go ahead keep printing trillions practically monthly. Stocks up, world riots escalate...lets see how long that works.

gwar5's picture

They'll own everything

Caviar Emptor's picture

Nov 2011: Fed announces new program to prop up sputtering college enrollment by buying up unfulfilled allowances to students from their parents, retroactive to pre-school enrollment. Students to use cash to support tuition costs. Fed to issue new 'Allowance Backed Securities' (ABS) and hold them to maturity on balance sheet. 

HarryWanger's picture

SPX been battling the 1287 to break out. Looks like it might have just succeeded. 

SheepDog-One's picture

WOW gee thanks for the bubble equity update Harry BTW hows that imaginary consumer goods business of yours going today?

LowProfile's picture

Just post this whenver the douch pours out his bag


Note that you need to post the "linkable version" for it to show up

alexwest's picture

###the "expansion" to QE2 (really, QE3 but who keeps count) to be announced sometime in May,

dont need to be a expert to see that... there's fundamental
problem feds revenues 2.2(1) trln $ - oulays 3.7(9) trln $
even I admit lately feds revenues up 5% y/y , its only 100 bln per more, but outlays too up 5% y/y ,, so net net deficit is here to stay...

so basicALLY UNDER ANY CONDITION FED IS NOT GOING TO STOP Q.EASING (AKA BOND BUYING / MONEY PRINTIGN) , its physically impossible , OTHERWISE if fed would stop money printing, there would be 2 choices

#SHUT DOWN half of federal outlays ( bear in mind currently revenues dont even cover mandatory spending SS/wars/debt servicing),, so it's just impossible shutdown wars/ close military bases/ get rid of federal waste.. umempl rate would be 15-20% in 1 year.. nobodoy is stupid enoght to do that..

# or foreign finance, well in that case it would 8-10% for 10yy bond , and this would bankrupt US , as debt servicing would skyrocket..

SO NO #ucking WAY OUT, USA AS COUNTRY BANKRUPT,, SIMPLE PURE.. IT'S MATTER of 2,3 YEARS MAX as debt is gonna be 18-20 trln % ,, 10YY %rate BOND UP ,, and end...

trust me

BUY GOLD/GUN/ CANNED FOOD / LIQUOR/ GAS ,, all hard assets

Geoff-UK's picture

Anyone have thoughts on how PIMCO expects to get a real return on this considering that even if the Fed buys this shit, PIMCO's making positive earnings in an inflationary riptide going the other way?


In short, am i an idiot to be increasing gold holdings when I could copy PIMCO's movement into Fed-put-guaranteed investments?

eureka's picture

Fab Fed Book Forever, Bitchez! BAC to $20.

Don't cry. Buy, buy, buy!

TonyV's picture

And gold is down because...?

Spalding_Smailes's picture

"We're now in the 'middle innings' of the current economic expansion, and the next economic recession is not yet in sight.”
- David Seiders, Chief Economist, National Association of Home Builders, Jan 2006


"There is no bubble to burst,"
- Jim Folkman, VP of the Home Builders Association of Central New Mexico


"When I hear [about a housing bubble] I get the sense that people aren't connecting the dots.”
- James Glassman, JP Morgan Chase Economist

Buck Johnson's picture

You are correct, they will purchase the muni's and other bonds under the table and then when next year rolls around announce QE 3 and say it will be used for the same thing they where doing in private.

FinanceSeer's picture

 Shouldnt that be PIMP CO?

 PIMCO is so Crooked they should arrest and rape themselves just to get the full PRISON experience that they and many of their ilk so RICHLY deserve! Just rotten mayne.