Liberty 33 To Get Busy (Officially) On August 17 When It Will Begin Purchases Of 2 Thorugh 10 Year Treasurys

Tyler Durden's picture

Just released by the New York Fed:

On August 10, 2010, the Federal Open Market Committee directed the
Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New
York to keep constant the Federal Reserve’s holdings of securities at
their current level by reinvesting principal payments from agency debt
and agency mortgage-backed securities (agency MBS) in longer-term
Treasury securities.  The most recent H.4.1 data release indicates that
outright holdings of domestic securities in the System Open Market
Account (SOMA) totaled $2.054 trillion as of August 4, 2010.  The Desk
will seek to maintain the face value of outright holdings of domestic
securities in the SOMA at approximately this level.  Due to differences
in settlement dates for purchases and principal payments, it is
anticipated that the actual level of domestic securities held will vary
around this level to some degree.  

In the middle of each month, the Desk will publish a tentative
schedule of purchase operations expected to take place through the
middle of the following month, as well as the anticipated total amount
of purchases to be conducted over that period.  The anticipated total
amount of purchases will be calibrated to offset the amount of
principal payments from agency debt and agency MBS expected to be
received over that period.  The announcement will occur shortly after
the monthly releases of current MBS factors from Fannie Mae, Freddie
Mac, and Ginnie Mae, allowing the Desk to anticipate the principal
payments to be received by the SOMA portfolio over the period.

The first tentative schedule of purchase operations and the
anticipated total amount of purchases to be conducted through the
middle of September will be published tomorrow, August 11, at 3 p.m. 
The purchase schedule will include a list of operation dates,
settlement dates, security types to be purchased (nominal coupons or
TIPS), and a maturity date range of eligible issues for each scheduled
operation.  The Desk expects to begin purchasing Treasury securities
under this policy on or around August 17.

The Desk will concentrate its purchases in the 2- to 10-year sector
of the nominal Treasury curve, although purchases will occur across the
nominal Treasury coupon and TIPS yield curves.  The Desk will
typically refrain from purchasing securities for which there is
heightened demand or of which the SOMA already holds large

Purchases will be conducted with the Federal Reserve’s primary
dealers through a series of competitive auctions via the Desk’s
FedTrade system.  The exact list of securities eligible for purchase
will be made available at the beginning of each purchase operation. 
The results of each operation will be published on the Federal Reserve
Bank of New York’s website shortly after each purchase operation has

And the FAQ on the debt's most recent monetization is here.

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Monkey Craig's picture

SOMA always reminds me of Brave New World

flacon's picture

It was probably chosen on purpose to reflect that book.

Mr Lennon Hendrix's picture

Their terms always reflect their book.  STIMULUS....QE LIGHT....SOMA....TARP....

Look not behind the curtain people!  Move along.

Gully Foyle's picture


Soma (Sanskrit ??? sóma), or Haoma (Avestan), from Proto-Indo-Iranian *sauma-, was a ritual drink of importance among the early Indo-Iranians, and the later Vedic and greater Persian cultures. It is frequently mentioned in the Rigveda, whose Soma Mandala contains many hymns praising its energizing qualities. In the Avesta, Haoma has an entire Yašt dedicated to it.

It is described as prepared by extracting juice from the stalks of a certain plant. In both Vedic and Zoroastrian tradition, the drink is identified with the plant, and also personified as a divinity, the three forming a religious or mythological unity.

Noah Vail's picture

Thank you, but I am already holding my ankles. Any further comments censored.

Cognitive Dissonance's picture

Did you lube up?

BTW it's clear from this announcement that they've been thinking about (and planning) this operation for days if not weeks. That's a great deal of specifics for something just decided on today, wouldn't you say?

Brutlstrudl's picture

 I've been holding mine since TARP and I gotta tellya, I'm runnin' low on vaseline

etrader's picture

And people wonder why certain billionaires  pledge dollars going forward......



etrader's picture

Nice coincidence after Buffett stumbled upon Adam Fergusson's book.....


GoinFawr's picture

...or was it Ralph Nader's?

dan10400's picture

Give it a few more years, and the rest of us pions can pledge our billions as well....

Ragnarok's picture

Excellent selling opportunity for foreigners!

Noah Vail's picture

Can any calculation how much the coupon from $1T in MBS comes to?

Ragnarok's picture

I beleive that $1.25T good sir.

SteveNYC's picture

Depends on how many people are still paying their mortgage. The yields could be distorted beyond belief would be my guess....

hedgeless_horseman's picture

Agreed.  I seem to recall something about troubles arising in 2008 from some derivatives not following predicted payment schedules.  The difference now is that the US taxpayer is the holder of the shitty tranches.  Nothing new under the sun?

asteroids's picture

The FED is like a dog eating its own puke. Pathetic.

beastie's picture

The FED is like a dog eating it's own shit.

There ya go fixed that typo for ya.

israhole's picture

That's the accurate analogy I've heard in a long time.

SheepDog-One's picture

Didnt that guy named Ben Bernanke swear up and down he'd never monetize the debt? Time to drag his ass behind an old pickup truck.

Jason T's picture

That would have been ... a lie.  



homersimpson's picture

Both parties are at fault..  worthless article.

King_of_simpletons's picture

I just posted the article. Why the animosity... I have always said in these forums that both parties have destroyed this country.

hedgeless_horseman's picture

If you want to cheer for a particular team try here, they have more choices and better trinkets:

Dr. No's picture

"Purchases will be conducted with the Federal Reserve’s primary dealers through a series of competitive auctions via the Desk’s FedTrade system"  Competing? like in who can buy with the lowest yield?  What does the winner get?

AccreditedEYE's picture

a shitload of paper ripe for downgrade.

Dr. No's picture

aint that the truth.  We live in an age of digital money where physical currency cant exist.  Even digital money in a savings account is being used to purchase something since the banks dont keep a vault full of paper money.  We have come full circle where paper currency may be better kept in a mattress.  The rate of return is the same but the security is better.

Gully Foyle's picture

I can't even get excited anymore. Everything is bad news and flowery propaganda.

Can't they just blow something the fuck up?


Ragnarok's picture

Can't they just blow something the fuck up?


The bond market, the dollar.... patience it took 100 years to get here, what's another 18 months.

lbrecken's picture

I just cant believe all year they buy debt and some how by admitting it today its a positive right at the the time its becoming obvious that no one in their right mind will own 10 yr paper yielding 2.7%

Gully Foyle's picture

Roy: How about a gross of fluorescent condoms for the the novelty machine in the men's room? I mean, those are fun even when you're alone. We're talkin' the hula hoop of the nineties.
Lancaster Bowl Manager: Look, I've told you. We don't need nuthin'. We don't even have a novelty machine in the men's room anymore.
Roy: And you call yourselves a bowling alley?

Paul S.'s picture

10's at 2.5 by year end.  Over or under?

jvota's picture

undah, with a bullet

dcb's picture

right about the time the wall street boys will start to window dress for end of quarter.

qussl3's picture

T-minus 13 mins to liftoff.

Cleanclog's picture

Silly silly equity buyers take it up.  Complete disconnect between actual company goods and services for sale for profit with expenses less than revenues as objective.  

Fed, policies and market intentions no longer paying attention to actual economic activities. A contrived world where they think houses will sell because rates are low, never mind the asset price.  So very mixed up and it isn't working.  When will they just throw in the towel?

Hansel's picture

Also on August 17:  Fannie and Freddie press conference

what a coincidence

Amsterdammer's picture

SOMA is adequately named. Tentative schedule

of purchase operations,wtf, FRBNY does not have the

resources to monitor theTBTF, according to Mrs Dahlgren

and Timmay

Is Fed Supervision of Big Banks Really Changing?

Maybe the FRBNY is run on (h) opium

mephisto's picture

So, if you are an american and don't believe in QE 1.01, then the sensible thing to do is stop paying your mortgage, no?

AUD's picture

What principle re-payments?

This sounds like more cheque kiting to me.