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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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Thu, 01/27/2011 - 10:14 | 909093 Alcoholic Nativ...
Alcoholic Native American's picture

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

Frankly I never want to see one again.

Thu, 01/27/2011 - 10:25 | 909134 Michael
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

Thu, 01/27/2011 - 10:29 | 909150 Alcoholic Nativ...
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.

Thu, 01/27/2011 - 10:43 | 909188 redpill
redpill's picture

Aggression is not libertarian.

Thu, 01/27/2011 - 18:53 | 911081 Lord Koos
Lord Koos's picture

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

Thu, 01/27/2011 - 10:45 | 909191 papaswamp
papaswamp's picture

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

Thu, 01/27/2011 - 11:10 | 909217 DaveyJones
DaveyJones's picture

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

Thu, 01/27/2011 - 15:03 | 910075 gmrpeabody
gmrpeabody's picture


Thu, 01/27/2011 - 11:14 | 909256 Mr Lennon Hendrix
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.

Thu, 01/27/2011 - 11:41 | 909327 Michael
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.

Thu, 01/27/2011 - 11:51 | 909388 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Art is the release valve.

Thu, 01/27/2011 - 12:34 | 909484 DaveyJones
DaveyJones's picture

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


Thu, 01/27/2011 - 15:10 | 910105 gmrpeabody
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Smoking saliva..., must be an oxymoron.  ~ Mr. Peabody  ;-)

Thu, 01/27/2011 - 15:27 | 910168 StychoKiller
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.

Thu, 01/27/2011 - 10:12 | 909094 AladdinSaneGirl
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.

Thu, 01/27/2011 - 10:12 | 909095 papaswamp
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.

Thu, 01/27/2011 - 10:12 | 909096 Salinger
Salinger's picture

green open - I think so

Thu, 01/27/2011 - 10:14 | 909102 umop episdn
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.

Thu, 01/27/2011 - 10:15 | 909108 hugovanderbubble
hugovanderbubble's picture

Im short...hope 1282 tested today or tomorrow

Thu, 01/27/2011 - 11:07 | 909261 stormsailor
stormsailor's picture

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

Fri, 01/28/2011 - 17:13 | 914424 M4570D0N
M4570D0N's picture

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

Thu, 01/27/2011 - 10:15 | 909106 bingaling
bingaling's picture

damage control

Thu, 01/27/2011 - 10:16 | 909111 Tense INDIAN
Tense INDIAN's picture

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

Thu, 01/27/2011 - 10:19 | 909120 Cheesy Bastard
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!

Thu, 01/27/2011 - 10:20 | 909123 thepigman
thepigman's picture

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

for the perfecta? Ramping treasuries?

Thu, 01/27/2011 - 10:21 | 909124 Whalers
Whalers's picture

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

Thu, 01/27/2011 - 10:24 | 909127 Sudden Debt
Sudden Debt's picture

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




Thu, 01/27/2011 - 10:22 | 909128 Stoploss
Stoploss's picture

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

Thu, 01/27/2011 - 10:23 | 909129 Dixie Normous
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.

Thu, 01/27/2011 - 10:31 | 909159 sushi
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.

Thu, 01/27/2011 - 10:53 | 909210 voltaic
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!  

Thu, 01/27/2011 - 11:08 | 909263 sushi
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.

Thu, 01/27/2011 - 18:55 | 911096 Lord Koos
Lord Koos's picture

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

Thu, 01/27/2011 - 10:24 | 909132 Whalers
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?

Thu, 01/27/2011 - 10:46 | 909196 docj
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.

Thu, 01/27/2011 - 10:26 | 909137 Commander Cody
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.

Thu, 01/27/2011 - 10:28 | 909138 Charles Mackay
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.

Thu, 01/27/2011 - 10:43 | 909186 pazmaker
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!

Thu, 01/27/2011 - 10:28 | 909143 oh_bama
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

Thu, 01/27/2011 - 10:28 | 909148 6 String
6 String's picture

Okay, Faber, reflation trade back on. Bananas!

Thu, 01/27/2011 - 10:29 | 909151 satansanus
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

Thu, 01/27/2011 - 10:38 | 909173 sushi
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.

Thu, 01/27/2011 - 12:32 | 909478 Captain Kink
Captain Kink's picture

I get Lind-Waldock....

And CNBC's Cramer, of all things!

Thu, 01/27/2011 - 15:31 | 910184 StychoKiller
StychoKiller's picture

Go to:

Follow the directions, ads go away!

Thu, 01/27/2011 - 10:32 | 909162 Dick Darlington
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?
Thu, 01/27/2011 - 10:35 | 909165 Johnny Lawrence
Johnny Lawrence's picture

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

Thu, 01/27/2011 - 10:39 | 909177 max2205
max2205's picture


Thu, 01/27/2011 - 10:40 | 909179 docj
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.

Thu, 01/27/2011 - 10:47 | 909198 papaswamp
papaswamp's picture

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

Thu, 01/27/2011 - 11:03 | 909242 erik
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.

Thu, 01/27/2011 - 10:48 | 909202 Spalding_Smailes
Spalding_Smailes's picture

Why is gold falling .... I thought the bottom was called .... ?


Thu, 01/27/2011 - 11:12 | 909277 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Why is the dollar falling?  I thought that we were pretending it is real?

Thu, 01/27/2011 - 12:00 | 909403 shortus cynicus
shortus cynicus's picture

It have something to do with gravitation. Paper falls much slower, in normal atmosphere.

But seriously: before COMEX defaults, there will be huge insider selling of paper gold.

Because silver is in backwardation, it's legitimate to set a question: is it happening now?

Thu, 01/27/2011 - 14:12 | 909868 Commander Cody
Commander Cody's picture

OK, why?

Thu, 01/27/2011 - 10:59 | 909227 erik
erik's picture

The Treasury has shrunk the SFP in two previous debt-limit standoffs and then brought it back when Congress restored borrowing room.

So when they agree to raise the debt ceiling this $20B per week in liquidity will be withdrawn once again.

Ending the SFP program could cause the rate on the three-month Treasury bill to slide to as low as 0.01 percent from 0.15 percent

These comments suggest that the money will simply move into the short end of the curve, and not into stocks or commodities.  We will probably know on Thurs Feb 3rd when we see the action in yields on the short end of the curve.

Thu, 01/27/2011 - 11:08 | 909268 johngerard
johngerard's picture

good point

Thu, 01/27/2011 - 11:16 | 909289 QQQBall
QQQBall's picture

IYR moving on up?

Thu, 01/27/2011 - 11:31 | 909338 Everyman
Everyman's picture

So what is the Play?

If you are playing 3x BEAR/BULL ETFs when would you buy/sell on these thursdays with $25B excess liquidity?  Is there better plays? Optoions? Let's get some trading theories and make some damn money off this crime.

Thu, 01/27/2011 - 11:38 | 909355 dcb
dcb's picture

if you think thse guys don't do technical analysis tyou have got to be kidding the fed is all about tech analysis the top and bottom trend lines in the traingale just about cross on 2/4/11 on my chart it is either 2/7 or 2/8. at about 1312 on the s and p.  since I believe the charts always tell what is happening the rule 48 todays as because ae are at top of speed line, they did this last week as well, (long term speed lines) this is the best way to chart s and P action, because the controlling algo uses this (for sure)

Thu, 01/27/2011 - 12:57 | 909568 AZSovreign
AZSovreign's picture

If I was a hacker, I would surely hack the computers running the Algo's, or fuck with the power to the building's each time there is an algo sell raid scheduled. Hmm mini EMP set off near the main buildings of the Fed, JPM, Goldman sounds fun too.


But i'm not a hacker or an EMP specialist so to the spooks monitoring this board, look the other way>>>>.

Thu, 01/27/2011 - 11:52 | 909391 raya123
raya123's picture

When they telegraph an end to POMO as they are doing now, there is no way the market will wait until early April to start dropping, as the market is always forward looking.  Besides, the Feds need a massive deflationary event well before then in order to justify QE3.

Thu, 01/27/2011 - 12:00 | 909405 DJIA36000
DJIA36000's picture

So HUGE rally coming in February and March.  Plus Fed noted yesterday that no correction until end of June.  What should we do in this situation? 

Thu, 01/27/2011 - 12:08 | 909421 haskelslocal
haskelslocal's picture

I concur with DJIA36000. What to do? Conflicting signals via the forward looking menatlity, technicals, unwinding, debt ceiling, emenant retracement to justify another nut.... How do we rip some vinyl from this?

Thu, 01/27/2011 - 12:12 | 909431 TruthInSunshine
TruthInSunshine's picture

It's a criminal racket. Any of the markets, commodities, equities, etc. could be crashed at any time.

Good luck to any honest person with any rational 'investment thesis' competing  with the insiders in this fraudulent, criminally fixed, sick game.

Bernanke is Satan.

Thu, 01/27/2011 - 12:06 | 909416 vjmali
vjmali's picture


Thu, 01/27/2011 - 12:32 | 909466 Ned Zeppelin
Ned Zeppelin's picture

The SFP program was never anything more than a tube of pig lipstick, as its real purpose was to help propagandize the pretext that everything was turning around, and such measures would be necessary. It was also supposed to answer that small group of critics who had voiced concern that the Fed could not its liquidity, and could withdraw it via programs such as these rather easily, and therefore help support the illusion that all was well, and even better support the illusion that the Fed even gave a shit about its so-called dissenters.   So even if it is being pulled now, it can simply be support for the new program of (a) doing all it can to raise alarm about the failure of CONgress to raise the debt ceiling (as if that is in doubt, but in a pluto-kleptocracy, it is useful to confuse the prey by a constant display of bright, shiny objects and, even worse, by letting them think they have rights too) and (b) the DOW is now 12K and that proves we are on the road to recovery.   If the SFP elimination happens to provide additional liquidity for the rampjob, so much the better, right? It's win-win, once again.

Thu, 01/27/2011 - 12:31 | 909472 Convolved Man
Convolved Man's picture

Welcome to the Rocky and Bullwinkle Blog Comment Theatre


Rocky      - (not in scene, represents the market)
Bullwinkle - played by Ben Bernanke
Top Hat    - played by Quantitative Easing
Lion       - played by Unintended Consequences
Rabbit     - (not in scene, represents strong economy, with low unemployment)


Bullwinkle, dressed as a magician and standing on a stage next to a small pedestal table upon which is placed a top hat brim side up, is about to reach into the top hat.

Bullwinkle:  (looking confident, reaches into the top hat) Hey Rocky, watch me pull a rabbit out of this hat.

Lion: (its head pulled out of top hat, menacingly baring its fangs) GRRRRrrrrrrrrrr.

Bullwinkle:  (looking flustered) Oops, Wrong hat.

The End

Thu, 01/27/2011 - 12:35 | 909489 Captain Kink
Captain Kink's picture

LOL.  Thanks

Thu, 01/27/2011 - 13:06 | 909604 All_Is_Well
All_Is_Well's picture

So in effect, when the Fed gets done, if ever, the PD's will own everything outright. Please, someone tell me I'm wrong...

Thu, 01/27/2011 - 13:17 | 909643 flaunt
flaunt's picture

Tyler, you are a machine.  The rate at which you crank out analyses of these programs that are quite complex to people like me to don't follow this stuff is stunning.  This is why I visit your site multiple times every day.

I had to read this slowly several times to fully comprehend what it means, but now that I understand it... Holy crap.



Thu, 01/27/2011 - 13:32 | 909690 Bullionaire
Bullionaire's picture


Interesting article.  Here's the money quote: "...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!" What TD doesn't mention is that this is also free money for Blanche Masters to smash PM prices further.  It could be that the next leg down for gold and silver will begin in about a week and last a couple of months. If this does happen, can we assume Blanche and Doug Kass are on first-name terms? 


Thu, 01/27/2011 - 13:35 | 909703 flaunt
flaunt's picture

That is illogical.  POMO chased PM prices much, much higher in 2010 and corresponded with huge net short reductions.  There are still lots of shorts to cover and effectively doubling POMO leads to the only logical conclusion: Higher PM prices.

Thu, 01/27/2011 - 18:48 | 911061 davepowers
davepowers's picture

again, the $200 raised for SFP was loaned to the FED who used the money in 2010 to buy Treasuries/QE 2.

Will the FED pay back the $200 billion as the Treasury winds down SFP? Where will they draw/withdraw the money?

Is one entities liquidity injection another's liquidity withdrawal?

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