Here It Comes: US Suspends New Issuance Under Supplementary Financing Program, $200 Billion Liquidity Gusher Imminent

Tyler Durden's picture

Earlier this week we predicted that the US Treasury would wind down its SFP program, unleashing $200 billion in 56-day non-rollable "Fed bonds" on the market. We predicted this would occur by mid-February. As of a few minutes ago, the Treasury has just confirmed that starting February 3, this will be precisely the case. Per the Treasury, supplementary financing account to fall to USD 5bln, with the reason being the traditional explanation: decreasing funds in account as country nears debt ceiling.

As the revised table below shows, each Thursday beginning February 3 we will now see an incremental $25 billion in extra liquidity as the maturing 56-Day CMB is not rolled.

From the US Treasury:

Treasury Issues Debt Management Guidance on the Supplementary Financing Program


WASHINGTON – The U.S. Department of the Treasury’s Assistant Secretary for Financial Markets, Mary Miller, today issued the following statement on the Supplementary Financing Program:
“Beginning on February 3, 2011, the balance in the Treasury's Supplementary Financing Account will gradually decrease to $5 billion, as outstanding Supplementary Financing Program bills mature and are not rolled over. This action is being taken to preserve flexibility in the conduct of debt management policy.”?

Here is what we predicted on January 24:

Here Comes Another $25 Billion In Excess Weekly Liquidity To Ramp Up Stocks

Frequent readers may recall that 11 months ago, when the economy was
falsely rumored to be doing better, and the Fed was expected to take
baby steps in withdrawing liquidity (only to end up having to inject
another $900 billion shortly... and probably much more soon), one of the
key mechanisms used was the Treasury's Supplementary Financing Program,
whereby the Treasury would issue 56-Day Cash Management Bills each week
with a $200 billion ceiling. In addition to funding the Treasury with a
$200 billion debt ceiling buffer, the program was supposed to extract a
fifth of a trillion in liquidity which would be locked into the rolling
of each 56 day bill (each one amounting to $25 billion) up to a total
of $200 billion, as disclosed each day in the Treasury's DTS SFP Table 1 open
cash balance. Well, not even 11 full months later, it is now time to
unwind the program. The immediate catalyst for the unwind of the SFP is
that the Treasury will most certainly breach the debt ceiling by the end
of March unless it gets the benefit of the $200 billion buffer, which
counts toward the total debt issued by the UST. However, what
that also means is that the US stock market is about to become awash
with another $25 billion in suddenly free cash every single week, until
the entire $200 billion SFP buffer is depleted.
In other words,
take the liquidity impact of POMO, which is roughly $25-30 billion a
week, and double it! We are confident the US Treasury will announce that
beginning with the week of February 14, it will no longer roll maturing
56-Day Cash Management Bills, which means that for the ensuing 8 weeks,
one on every single Thursday, there will be a total of $200 billion in
incremental liquidity flooding the market, and probably sending stocks,
commodities, and everything else that is not nailed down into the
stratosphere all over again.

Below is a table laying out our
estimated weekly liquidity boost. We believe the starting date for the
SFP winddown will be the week of February 14, although we could be off
by one week in either direction. (Zero Hedge update: February 3 seem just about right).

makes sense, especially when considering of our expectation that the
Fed will force the market to do a repeat performance of 2010, whereby it
goes parabolic through mid-April and then it is smashed in another
flash crash like event due to some exogenous variable, opening up the
path for further Quantitative Easing. That said, it is likely that the
PDs and the Fed's OMO will now orchestrate the perfect market boil up
over the next 2 months as more than ample liquidity chases stocks at
increasingly ridiculous multiples until the point where everything goes
bidless just like on May 6.

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Alcoholic Native American's picture

Flash crashes??? I thought we fixed such market manipulations?

Frankly I never want to see one again.

Michael's picture

V for Victory Campaign. The Youtube video I made has 4,000+ views.

It would have been 5,000+ except I deleted the original version.

SNL Style V Comedy Sketch INFOWARS.COM

Alcoholic Native American's picture

Infowars is full of loony libertarians like that guy that shot that congresswoman. The guy rambles on about groping and aborted fetuses.

Not my cup of tea mate.

Lord Koos's picture

You wouldn't know that from the smell around here.

papaswamp's picture

The guy was into wealth redistribution, communism and believed the govt is using mind control. you are way off.

DaveyJones's picture

weird, that's exactly what the government is into    (definitely not Libertarian :/)

Mr Lennon Hendrix's picture

You ever smoke salvia?  I ask because I never have, probably never will, always been too scared to try.  Maybe if I sat down with an aztec warrior/shaman who watched over me in the middle of the desert away from rocks (snakes), other people (snakes), and, well, snakes.  I have heard everything goes 2-D and cartoon like.  Sounds entertaining and all but I have never been in the right situation to give it a try.  When your friend offers you some and you look out the second story window in contemplation the quick answer is, " thank you."  I like knowing who I am and where I am when I experiment. 

And by the by, dude was a liberal.  He had a crush on Ms Giffords.  Crazy in love happens all the time, but then when you smoke salvia EVERYDAY crazy shit really happens (not to mention he already suffered from a form of schizophrenia).  So please, go use the Hegelian dialectic somewhere else.

And why stereotype?  Fox is not full of loonies?  Msnbc heads are the most out of date people I know.  Half of liberals are faux hippies who drive in cars for fun, but still support global climate changing warming and cooling.  The other half think Averal Harriman is still alive.  Sarah Palin is not fit to be el President (or la I guess?).  She is not smart enough.  Sorry Sarah, for your consolation you can have your own reality TV show forever.  Maybe we could get Jessica Simpson to guest star.

Alex Jones is far from perfect.  Yesterday he said bicyclist treat car drivers like bastards.  Well it goes both ways, and I have witnessed cars hit bikes and who got hurt?  See, even he furthers the dialectic, and he is one of the few that knows about it.  So if you are going to get in the game, you gotta have your facts right, and you can't build strawmen.  Loughner was a liberal, and he smoked salvia EVERYDAY.  He was higher than Hunter S and needed to be in a mental hospital.

And I like Mate tea too, mate.

Michael's picture

Hegelian dialectic, Cognitive dissonance. It's all a mind fuck. Tuff to break out of the hypnosis.

I may have caused a bit of Cognitive Dissonance recognition with this video. Understanding the process is the1st step in breaking the mind set. You have to know how to do the thing in order to understand it and use it against them.

That's why you may not want to rate it up or down. You're conflicted.

DaveyJones's picture

Man will begin to recover the moment he takes art as seriously as physics, chemistry or money.  ~Ernst Levy


gmrpeabody's picture

Smoking saliva..., must be an oxymoron.  ~ Mr. Peabody  ;-)

StychoKiller's picture

Salvia Divinorum -- diviner's mint.  The latest fad drug to be taken up by young fools that have no idea what they're messin' with.  It grows in only one particular region in Mexico, and so far, is mostly legal in the USA.

AladdinSaneGirl's picture

My gut feeling is that stocks will bubble up until around April, a bit like last year. What you say seems to support that. Interesting.

papaswamp's picture

With all the bad news...they have to mix a little nitro in to keep Wall Street going...main street already crashed.

Salinger's picture

green open - I think so

umop episdn's picture

Is this an avalanche of bankster paper, or is it more like a tsunami of debt? I suppose it will all burn anyways.

hugovanderbubble's picture

Im short...hope 1282 tested today or tomorrow

stormsailor's picture

your a brave man  hugo.   i'm short today and right now getting my butt kicked.

M4570D0N's picture

If you see this, congrats. [insert dancingbanana.jpg here]

Tense INDIAN's picture

that means surely the EMs will go higher from the pesent least till a few weeks

Cheesy Bastard's picture

In other words, take the liquidity impact of POMO, which is roughly $25-30 billion a week, and double it! We are confident the US Treasury will announce that beginning with the week of February 14

Happy Valentines day sweetie.  I have a big red heart on for you!

thepigman's picture

HMMMM, TD....why won't this be used

for the perfecta? Ramping treasuries?

Whalers's picture

Just in time to help prop up the market after the Fannie and Freddie report is released.

Sudden Debt's picture

How many companies can they buy each week for 25 billion?




Stoploss's picture

If your going out, might as well go out with a bang.

Dixie Normous's picture

Very theoretical but:

The push and pull of this is getting very interesting: issues like world protests possibly spreading to Europe, maybe problems at the Suez canal (from an earlier ZH story) and the historically "safe" dollar saying FU to the world because we need Dow 50,000.

May you live in interesting times indeed.

sushi's picture

Interesting in Davos.

J Dimon appeared on a panel "Criminals without Borders" and objected to people saying unkind things about bankers.

Someone took his talk to heart as a bomb went off after that.

The press were issued with a copy of the menu for the Delegates dinner in the Grand Salon but according to reports all 16 pages of menu offerings were redacted. One official reported that they did not wish to "add fuel to the famine" by letting the starving third world know about the 747 cargo fleet busy replenishing the Swiss caviar supply.

voltaic's picture

Is there something kind that can be said about banksters? I get it. These poor sensitive souls simply wanted to rape the taxpayer and pillage the Treasury, destroy housing and nations, and play multi-trillion dollar derivatives games that are yet to end, and people get all upset. How dare they. Have a heart people. Banksters are your best friend and they are a benevolent sort with hearts of gold (and silver), who are looking out for your best interests. Trust us. Those taxpayer funded multi-million dollar bonuses were earned by gosh!  

sushi's picture

Keep talking like that and they will foreclose on your dwelling and sell it out from under you. Even if it is a rental.

Lord Koos's picture

Hey you gotta get something for your $100k ticket.

Whalers's picture

Wait a minute, if the Fed is the biggest owner of US debt wouldn't they own a lot of these bills that are NOT being reissued.  Wouldn't that take liquidity out of the market?

docj's picture

The Fed is the biggest owner - but only with a small plurality.  They don't own anything close to a majority of the debt.

Commander Cody's picture

Last gasp Treasury liquidity pump.  The Fed continues the pump until mutually assured destruction is assured via commodity inflation, dollar devaluation, and risk asset declines when measured against any currency.

Charles Mackay's picture

Tyler, you hit the nail exactly on its head here.  Being that precious metals are so currently unloved, I expect them to be one of the biggest beneficiaries of the T bill roll off.  Also, despite the Euro being so hated - hey its Gartman's short of the year from 1.31 (well did you actually think he would be right?) - the dollar looks to breaking down and this may push it over the edge.

pazmaker's picture

Charles, the EUR  doesn't have much going for it either.  I wouldn't make any long term trades either way on EUR/USD.  Just scalp. Volatility is your friend!

oh_bama's picture

Is there 200B SFP part of the 14.3 debt limit? If so they may just need to replace that with new debt, correct? I am confused

6 String's picture

Okay, Faber, reflation trade back on. Bananas!

satansanus's picture

Seeing schwab ads on zerohedge makes me want to vomit.

Cant you filter out that shit? Thats like running Madeoff investment co ads

sushi's picture

The ads that you see are based on your prior browsing history. Not everyone gets the same ad. I don't get any investment related ads. Just lots of babes and porno come ons.

Captain Kink's picture

I get Lind-Waldock....

And CNBC's Cramer, of all things!

Dick Darlington's picture
01-27 09:25: ECB's Trichet says ECB did not engage in quantitative easing Did anyone notice the stick save in Belgium govies this morning?
Johnny Lawrence's picture

So do the PDs own these 56-day notes now, and the Fed is going to return principal?

max2205's picture


docj's picture

FUNemployment and durable goods numbers, even from The Ministry of Truth, obviously don't matter a whit to Mr. Market.

But this?  Well, it's a big f'ing deal.

papaswamp's picture

...and we are into the green folks as equities drool on themselves with the coming heroine/cash injection.

erik's picture

the Nasdaq, and Russell especially, had to have one more good day in order to re-test.  though to be fair i don't think the Russell makes it back to re-test.  notice the Dow has been a laggard in the last couple sessions.

a correction depends entirely on the US dollar finding a bid.