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It's Official: Fed Is Now Second Largest Holder Of US Treasury Bonds

Tyler Durden's picture




 

Today's POMO is over: at $2.069 billion, the operation was right in line with our expectations, coming in at a lofty 12.16 submitted to accepted ratio, as investors apparently are not too crazy about the yield perspective of the 4 2013 CUSIPs that were repruchased. However, what is far more important is that with holdings of $821.1 billion, the Fed is now officially the second largest holder of US Treasurys. Next up- China.

While the official breakdown will likely be a few weeks late in coming, here is the math:

Fed holdings as of September 30: $811,669

Add:

Total: $821.128 Billion, which compares to Japan total $821.0 Billion as of July 2010

Congratulations, America: your central bank is just $25 billion away from being the Treasury's largest creditor, and thus able to dominate any and all future debt restructuring negotiations with what is, essentially, itself.

 

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Wed, 10/06/2010 - 11:24 | 629220 Cognitive Dissonance
Cognitive Dissonance's picture

Thank God. Now they can get down to the really serious business of taking over first place.

Second place is just the first loser.

BTW, when is the next round of the POMO pump starting up? I keep the schedule taped to my monitor next to my Ben Bernanke pinup.

Wed, 10/06/2010 - 11:47 | 629301 ShankyS
ShankyS's picture

The next schedule is released on 10/13, but not so sure how they will do that before FOMC on 11/03, but I'm sure they will find a way. This is fucking stupid.

Wed, 10/06/2010 - 11:53 | 629325 Arthur Vandelay
Arthur Vandelay's picture

If you're not first you're last

Wed, 10/06/2010 - 12:23 | 629471 infotechsailor
infotechsailor's picture

+1 , lmao art... go fast!

Wed, 10/06/2010 - 12:14 | 629431 Big Corked Boots
Big Corked Boots's picture

Can't settle for the steak knives!

http://www.youtube.com/watch?v=wVQPY4LlbJ4

 

Wed, 10/06/2010 - 12:23 | 629472 aerojet
aerojet's picture

I believe Denninger is one person who predicted that the Fed would end up owning all of the treasuries.  I'm sure he ripped the idea off of someone else, though.

Wed, 10/06/2010 - 14:58 | 630028 A Nanny Moose
A Nanny Moose's picture

Almost only counts in horse shoes, hand grenades, and Hellfire missiles fired near weddings.

Wed, 10/06/2010 - 11:24 | 629228 Dr. Engali
Dr. Engali's picture

I wrote myself a loan last week to buy a big screen tv. Now the question is do I pay myself back or default?

Wed, 10/06/2010 - 11:43 | 629288 Cognitive Dissonance
Cognitive Dissonance's picture

Neither.

Declare a moratorium on payments and foreclosures and call it a day. Then kick back in front of the big screen and curse at all those bankstas trying to foreclose on those bums who've been living mortgage/rent free for years.

Karma baby. You really can make your own. :>)

Wed, 10/06/2010 - 12:17 | 629444 Dr. Engali
Dr. Engali's picture

Thanks for all your input. I think I will plop my ass down, slide my hands down my pants, watch Judge Judy ,collect food stamps and let my neighbor pay me back. 

Wed, 10/06/2010 - 12:58 | 629636 Cognitive Dissonance
Cognitive Dissonance's picture

I think I will plop my ass down, slide my hands down my pants, watch Judge Judy, collect food stamps and let my neighbor pay me back. 

Multi tasking bitches.

Wed, 10/06/2010 - 11:43 | 629292 Clark_Griswold ...
Clark_Griswold Hedge Mnger's picture

depends on whether you Titled it and if you can trust yourself for not committing fraud (to yourself), but blame it on Waddle.

 

 

lol CD you beat me too it!

Wed, 10/06/2010 - 11:55 | 629340 Cognitive Dissonance
Cognitive Dissonance's picture

lol CD you beat me too it!

Nothing much to do this morning so I decided to spam ZH. :>)

Wed, 10/06/2010 - 12:00 | 629362 Clark_Griswold ...
Clark_Griswold Hedge Mnger's picture

God I love this site!

the entertainment of the posts and comments is about the only thing keeping my sanity intact in this insane world.

Good to know there are still a few cynical types out there besides me.

Wed, 10/06/2010 - 12:03 | 629377 fuu
fuu's picture

This isn't cynical, this is reality.

Wed, 10/06/2010 - 13:52 | 629813 DavidC
DavidC's picture

fuu
Spot on!

DavidC

Wed, 10/06/2010 - 13:21 | 629718 Sudden Debt
Sudden Debt's picture

the entertainment of the posts and comments is about the only thing keeping my sanity intact in this insane world.

This site and that little box of Xanax you mean? :)

Wed, 10/06/2010 - 14:27 | 629896 Clark_Griswold ...
Clark_Griswold Hedge Mnger's picture

How did you know?  :>)

Wed, 10/06/2010 - 12:25 | 629478 aerojet
aerojet's picture

Yeah, I don't get how the circle jerk can keep going on and on.  Maybe there is a quantum-mechanical answer?  The Fed can pull capital in from other parallel dimensions that are currently more prosperous than our own?

Wed, 10/06/2010 - 15:50 | 630193 Cognitive Dissonance
Cognitive Dissonance's picture

It works the same way watching a movie works for you, even when you're watched it before. You simply suspend disbelief in order to enjoy yourself.

The economic system and its participants simply suspend disbelief in order to protect themselves. They're all in this together now. The first one who tries to bring sanity to the surface will be snuffed out by the others. Thus they all live together in this fantasy world or they all hang from the same fiat tree.

The knowledge of certain death coming in the morning brings wonderful clarity of purpose the night before.

Fri, 10/08/2010 - 02:38 | 634542 mike5885
mike5885's picture

"The knowledge of certain death coming in the morning brings wonderful clarity of purpose the night before."

 

wow, so scary, but oh so true

Wed, 10/06/2010 - 15:00 | 630035 A Nanny Moose
A Nanny Moose's picture

Dispense with the formalities, just hire some thugs to come teach yourself a lesson.

Wed, 10/06/2010 - 11:25 | 629232 No Mas
No Mas's picture

Curious for some perspective.

How much federal debt has the Federal Reserve held in the past?  What was the impact?

Wed, 10/06/2010 - 11:27 | 629241 Astute Investor
Astute Investor's picture

Gentlemen, there are NO points for second place!

 

Wed, 10/06/2010 - 11:37 | 629275 Old School
Old School's picture

According to Geithner, the US will not monetize their debt. He's lying thru his teeth!

Wed, 10/06/2010 - 11:51 | 629320 carbonmutant
carbonmutant's picture

That seems to be the MO for the entire current administration.

Wed, 10/06/2010 - 12:57 | 629629 Geoff-UK
Geoff-UK's picture

"That seems to be the MO for the entire United States city, county, state, and federal governments, both Democrats and Republicans."

There, I fixed it for you.

Wed, 10/06/2010 - 15:14 | 630089 carbonmutant
carbonmutant's picture

Only one of them is in control of the WH and the Congress...

Thu, 10/14/2010 - 18:50 | 651044 Geoff-UK
Geoff-UK's picture

Au contraire, mon frere:  George Bush approved TARP-1 on 3 Oct 2008, after ADMITTING he was abandoning his principles.  Whatever those were.

Both parties are worthless in protecting the middle class.

Wed, 10/06/2010 - 11:37 | 629278 mynhair
mynhair's picture

Get your 11K hats ready - here it comes.

Wed, 10/06/2010 - 11:49 | 629308 HarryWanger
HarryWanger's picture

They're desperately trying to pump to another "psychologically important" number. How silly.

Wed, 10/06/2010 - 12:11 | 629419 MrVincent
MrVincent's picture

Just in time for the elections!

Wed, 10/06/2010 - 12:13 | 629426 Cognitive Dissonance
Cognitive Dissonance's picture

Sorta like a economic penis pump. Only better. Yeah, that's the ticket.

Not that I have any direct experience with.......er.......never mind.

Wed, 10/06/2010 - 11:57 | 629348 firstdivision
firstdivision's picture

10 year is sitting pretty low at 2.38% right now.  Soon it will be a yeild line and not a curve.  Those that bet on flattners are banking it.

Wed, 10/06/2010 - 12:04 | 629382 Clark_Griswold ...
Clark_Griswold Hedge Mnger's picture

I just scrolled through a bunch of 10/20 year charts, and just about everything is punching through new all time highs, slw, gdx etc, name your favorites....  explain to me how they claim its a bubble? I can't even type it with a straight face.  as the dollar, euro, yen all of it is in a race to the bottom.

The hard part is actually pulling the trigger to take some funds off the table to book some profits, but with uncle Benny printing like there's no tomorrow, all pomos doing is adding higher digits in my returns.

 

Wed, 10/06/2010 - 12:26 | 629495 aerojet
aerojet's picture

Sure, what could possibly go wrong?  The Fed is blowing the mother of all bubbles, the last bubble, as it were.

Fri, 10/08/2010 - 02:40 | 634543 mike5885
mike5885's picture

I can hear the rivets on the cabin starting to pop

Wed, 10/06/2010 - 12:05 | 629387 99er
99er's picture

Chart: The Long Bond

Yield? What's that?

http://99ercharts.blogspot.com/2010/10/zb.html

Wed, 10/06/2010 - 12:09 | 629409 hedgeless_horseman
hedgeless_horseman's picture

When it turns it will be the mother of all yield rallies.

Wed, 10/06/2010 - 12:16 | 629436 Clark_Griswold ...
Clark_Griswold Hedge Mnger's picture

Bloomberg

"Goldman Sachs Say U.S. Ecomony May be 'Fairly Bad'"

No Shit!

Ya Think?

You guys get bonuses for that?

Wed, 10/06/2010 - 12:42 | 629567 S474NtheD3v1L
S474NtheD3v1L's picture

quit yer bitchin

the fed is saving us, from ourselves

Ben Bernanke, a TRUE AMERICAN HERO, i salute you

Wed, 10/06/2010 - 12:52 | 629606 cowdiddly
cowdiddly's picture

timmaay. Push the yield curve down, down, down. Then make the bangstas reset every outstanding mortgage still left to <3%. Then we return to the housing based economy we so longingly wished for. My, My what a PUTZ> 

Wed, 10/06/2010 - 13:08 | 629666 curbyourrisk
curbyourrisk's picture

OK..here is a novel idea.

 

What happens if the Treasury strategically defaults on all the debt bought by the FED???  Just those bought by the FED.  Seriouslly  what would happen???? 

 

Was this the plan all along????  When I joked about it last year....it was considered pure tin foil.....

Wed, 10/06/2010 - 13:45 | 629779 Pinky
Pinky's picture

Not a novel or tinfoily idea at all!  I've suspected this was the plan since about 2007.

See here:  The Fed-Treas-Goldman-JPM-etc. Nexus operates as a single unit.  They might as well:  Look at the shareholders and stakeholders and realize . . . holy shit, they're the same people! They're going to owe THEMSELVES!

Next on the menu:  Some kind of cyber incident that, whoops, erases the paper trail.  You heard it here first, erhm, second, erhm . . . Road to Roota, anyone?

Wed, 10/06/2010 - 14:14 | 629862 Whatta
Whatta's picture

OK, so what is the conclusion of that scenario? Debt forgiveness since there never was "real" debt in the first place? Larger boni (plural of bonus) for all involved? They can't give themselves taxpayer bailouts cuz taxpayers are now on the Federal Endangered Species list and can't be harmed.

Wed, 10/06/2010 - 14:57 | 630007 Pinky
Pinky's picture

See this from the perspective of a self described pirate hero (not me because I'm nobody). You don't have to buy it; it's just a mental exercise.

Once the Fed gets as close to 100% as it can reasonably get, the Fed implodes. Matter meets antimatter and POOF! US debt goes bye bye. Fed sez "Thank you veddymush," and takes a bow.  It transforms itself into a new entity; let's call it the Hot Fudge Sunday because, really, I have no idea.

What would be the fallout? Continuing with the exercise . . .

For once the Little Guys are only half-screwed, instead of fully screwed, by the Rothschild Repo Man who had REALLY wanted, very very badly, to hoover up US assets on the cheap. The Little Guys will get to keep their homes because of the securitization ponzi scam.  Their 401Ks will continue to grow thanks to the "plunge protection team." They will get "jobs:" The government will pay them to dig holes and fill them up until the economy recovers.  Their credit card balances will be written off by the banks, who will be bailed out by "Benny and the Inkjets" (PS: I'm starting a band, and thats what I'm gonna call it).

Everyone who shorts the US dollar or stock market will (continue to) be shanked until they get the message: NEVER. EVER. SHORT. THE. UNITED. STATESOFFUCKINGAMERICA!

The pirates will be recast as pirate-heroes who were really doing Gods Work after all. All will be forgiven. Madoff will be pardoned: He was a crook, but he was "our crook" (don't barf, please, this is an exercise). 

I've had an inkling about this for a long time, once I discovered the derivatives were no recourse and that US mortgage paperwork was, in many cases, "lost" along with the creation of said derivatives, aaaaand . . . the SEC was complicit.

Well wouldja look at that: The long-planned, IMF-economic-hitman-let's-do-this-like-we-did-Argentina-styled takedown of the US will have been officially thwarted by a team of Randian banksters and their robot armies. And for what might be the first time ever, a group of people will have succeeded taking down the Master's house, from inside the house, using the master's tools.

Kind of brilliant, actually. And THAT is why they are claiming that the recession is "over." Not that it is ("bitch, please"), but that they're at the point where they really do think they can pull this off. Right now Mr. Greenspan, who never really stopped being an Objectivist after all, is probably sitting in his lair wringing his hands and hissing "Exxxxcelllent . . ."

Of course, I could be totally wrong.

Or, I could be right, and it could go horribly wrong.

Wed, 10/06/2010 - 15:31 | 630118 ATTILA THE WIMP
ATTILA THE WIMP's picture

Here’s my GUESS on what would happen if the US Treasury defaulted on the debt that it owns to the Federal Reserve System Inc.:

Nothing at all.

My theory is that the Fed determines the (global) supply of FRNs when it buys assets with newly created money that did not previously exist. When it buys assets of any sort the FRN supply goes up and because the Fed seldom if ever sells assets the money supply is always expanding the only variable being the rate of expansion.

If the Treasury defaulted on its IOUs to the Fed it wouldn’t mean squat because if the Fed subsequently wanted to buy anything it would just create more FRNs. The Fed doesn’t need its assets. It doesn’t make the least difference if the Fed has tons of assets or none at all, and in any case most of its “assets“ are vaporous bullshit like Treasury debt and MBS. If the Fed had any gold I’d see things a lot differently. All I watch is how much FRN money is created by the Fed buying “assets.” Once these FRNs used to buy assets go flying out the Fed door they have to be honored because they are legal tender but … the amount of Fed “assets“ in the Fed‘s book at any given time doesn‘t mean squat.

As you can see from the following link Fed assets exploded in 2008 and thus the global supply of FRNs likewise exploded and FRN holders started buying up everything in site. Hence the explosion in the price of all assets except (in America) labor and housing, the two assets/income streams of the Amero-peasants.

http://usbudget.blogspot.com/2008/12/federal-reserve-balance-sheet.html

My Guess is that the Fed and politicians will continue to expand the FRN supply until the Chinese etc. stop taking them. Then a tsunami of FRNs will come back to America, they only place where they are legal tender. Prices of everything will explode (except for wages and housing) especially imported stuff or stuff dependent on imported inputs like food.

By the way, my theory/guess basically draws no important distinction between FRNs and Treasury IOUs denominated in FRNs. An FRN is basically a note (for peasants) that pays no interest. (That’s why it pays no interest, it’s for peasants.) Treasury IOUs are basically legal tender for aristocrats (that’s why they pay interest).

As for derivatives and other funny money my guess is that the Fed/politicians will continue to buy them up (and increasing the FRN supply) until the world stops taking our paper. Because there is so much of this funny money most will not be bought up before the GREAT COLLAPSE so if you have any paper of any sort bail now.

Because of this view of the world FRN supply I put everything into gold/silver and have a year’s supply of canned food which I constantly expand.

I am a retired computer programmer and have no formal training in economics and certainly no PhD from a “good” university.

Fri, 10/08/2010 - 02:42 | 634545 mike5885
mike5885's picture

they dump the bill on  all of us and our children, then run for re-election

Wed, 10/06/2010 - 13:20 | 629711 reddragonleo
reddragonleo's picture

Kinda like playing monopoly with yourself, as you lend money to yourself, and borrow money from yourself... or is it more like musical chairs?

Wed, 10/06/2010 - 13:23 | 629721 Sudden Debt
Sudden Debt's picture

You forgot the laser printer that prints 1000.000$ bills. But for the rest you nailed the monopoly game as it should be played :)

Wed, 10/06/2010 - 13:25 | 629731 drbill
drbill's picture

Where's today's POMO pump???

Wed, 10/06/2010 - 13:37 | 629759 treemagnet
treemagnet's picture

Didn't Earnhardt say "second place is just the first loser..."

Wed, 10/06/2010 - 14:31 | 629927 sbenard
sbenard's picture

Why hasn't the Fed published a schedule of purchases for the next few weeks? Are they perhaps feeling a little heat from the spotlight on their activities? Is the cockroach running for the secretive cover of darkness now?

Wed, 10/06/2010 - 15:36 | 630152 mochoajr
mochoajr's picture

This site and a bottle of tequila!

 

Wed, 10/06/2010 - 19:51 | 630797 Rider
Rider's picture

Welcome to "The Greatest Circle-Jerk in Human History."

Be a part of it, do not miss the opportunity.

Thu, 10/07/2010 - 10:26 | 632070 The Butchers Dog
The Butchers Dog's picture

So, Once the Fed is the only Treasury owner - Wouldn't that open the door for a Dollar re-valuation (without pissing off Foreign Nations?)

Fri, 10/08/2010 - 02:43 | 634546 mike5885
mike5885's picture

Stop giving the ideas

Thu, 02/24/2011 - 00:37 | 991748 shawnlee
shawnlee's picture

God I love this site!

the entertainment of the posts and comments is about the only thing keeping my sanity intact in this insane world.

Good to know there are still a few cynical types out there besides me.

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Tue, 03/22/2011 - 03:59 | 1085126 shawnlee
shawnlee's picture

So, Once the Fed is the only Treasury owner - Wouldn't that open the door for a Dollar re-valuation (without pissing off Foreign Nations?) led watch - diamond watches - oris watches - raymond weil watches - anne klein watches - d&g watches - iwc watches

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