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New York Fed Announces It Will Conduct 7 POMO Operations Beginning July 1 As Part Of Continuing QE Lite

Tyler Durden's picture




 

Just as expected, the New York Fed disclosed that even as QE2 is being halted (briefly),  QE Lite purchases of maturing securities will continue, across the Fed's 7 maturity segments: "At this time, the Desk
anticipates conducting one operation per month in each maturity sector."  As we have calculated before the total amount of monthly "flow" purchases will be about $32 billion, and likely declining, as less and less MBS are prepaid to the Fed. In other words, the bulk of purchases will once again be at the belly, with the least amount dedicated to the long-end, followed only by the 1.5-2.5 year segment, which however, if Bill Gross is right, will see a surge in activity as soon as Operation Twist 2 is announced at this year's Jackson Hole meeting.

From the New York Fed:

Statement Regarding Purchases of Treasury Securities

On June 22, 2011, the Federal Open Market Committee (FOMC) directed
the Open Market Trading Desk at the Federal Reserve Bank of New York
(the Desk) to complete purchases of $600 billion of longer-term Treasury
securities by the end of June.  The FOMC also directed the Desk to
maintain its existing policy of reinvesting principal payments on all
domestic securities in the System Open Market Account in Treasury
securities in order to maintain the total face value of domestic
securities at approximately $2.6 trillion.

Under the existing
reinvestment policy, principal payments from agency debt and agency
mortgage-backed securities (MBS) are reinvested in longer-term Treasury
securities.  In implementing this policy going forward, the Desk will
follow operating practices similar to those established during the $600
billion Treasury purchase program.

Purchases will be allocated
across maturities according to a distribution that is nearly identical
to that executed under the Treasury purchase program.  The only change
to the distribution is that the two maturity sectors beyond 10 years
from the earlier purchase program will be combined into a single
maturity sector of 10 to 30 years in order to achieve greater
operational simplicity.  Specifically, the Desk plans to distribute
purchases across seven maturity sectors based on the following
approximate weights:

Nominal Coupon Securities by Maturity Range*

TIPS**

1½ -2½
Years

2½-4
Years

4-5½
Years

5½-7
Years

7-10
Years

10-30
Years

1½-30
Years

5%

20%

20%

23%

23%

6%

3%

*The
on-the-run 7-year note will be considered part of the 5½- to 7-year
sector, and the on-the-run 10-year note will be considered part of the
7- to 10-year sector.
**TIPS weights are based on unadjusted par amounts.

The size
and frequency of operations will be reduced to levels commensurate with
agency debt and MBS principal payments.  At this time, the Desk
anticipates conducting one operation per month in each maturity sector.

The
Desk will continue to release a tentative schedule of purchase
operations on or around the eighth business day of each month, with each
schedule providing information on the operations expected to take place
through the middle of the following month.  The next schedule will be
released on July 13, 2011.

 

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Wed, 06/22/2011 - 13:44 | 1392387 qussl3
qussl3's picture

2 a days to 2 a week.

This is gonna be fun.

Wed, 06/22/2011 - 14:02 | 1392458 Ahmeexnal
Ahmeexnal's picture

Gold and silver are taking off.

By the time shepple decide to get off their asses and drive their BMWs to the coinshops, it will be too late for them.

Expect self-immolations to go viral as their eyes finally start to open.

Wed, 06/22/2011 - 14:25 | 1392559 Dr. Richard Head
Dr. Richard Head's picture

Just wait until the CONgress votes to raise the debt ceiling in a few months.  WEEEEEEEE!!!!!!!!!!!!!!!

Wed, 06/22/2011 - 23:16 | 1393761 HungrySeagull
HungrySeagull's picture

They would not dare.

If they do vote that increase, One side of me is gonna be laughing hysterically and the other side will be really crazy.

They have rubber lined rooms for that problem.

Wed, 06/22/2011 - 14:17 | 1392501 trav7777
trav7777's picture

no way the gov can fund unless they are lying

Wed, 06/22/2011 - 14:42 | 1392619 NotApplicable
NotApplicable's picture

Well, it's obvious they're lying, their lips are moving.

As for the funding, that all depends on the script. I bet they could clandestinely fund if they wanted to, but with election season approaching and an angry electorate, they are going to bring on some pain, and blame it all on the opposition (primarily the Tea Party).

Wed, 06/22/2011 - 13:46 | 1392394 oogs66
oogs66's picture

will they ever tell us what prices they paid?

Wed, 06/22/2011 - 13:51 | 1392410 financeguru500
financeguru500's picture

Considering the people who have the largest share in the privately owned federal reserve, I'd guess pennies on the dollar.

Wed, 06/22/2011 - 14:01 | 1392438 camaro68ss
camaro68ss's picture

is there a cap to this" QE lite"?

Wed, 06/22/2011 - 14:49 | 1392665 NotApplicable
NotApplicable's picture

Yes. Unfortunately, it's roughly the size of the US real estate market as denoted by Fannie/Freddie paper.

Wed, 06/22/2011 - 13:52 | 1392402 financeguru500
financeguru500's picture

So all that talk a few months ago about quitting the purchasing of treasuries was just fluff? Pretty much the equivalent of a meth addict telling the police that they promise not to buy any more meth and then a week later the cops catch them again.

Wed, 06/22/2011 - 13:58 | 1392419 Max Hunter
Max Hunter's picture

So all that talk a few months ago about quitting the purchasing of treasuries was just fluff?

It actually use to be called lying.. but who's counting..

Wed, 06/22/2011 - 20:34 | 1393566 jerry_theking_lawler
jerry_theking_lawler's picture

your analogy is slightly off....they don't buy the meth...they get the crazy little cousin to buy it for them....

Wed, 06/22/2011 - 13:52 | 1392407 firstdivision
firstdivision's picture

Just like QE1 -> QE1.5 -> QE2 -> QE2.5 -> QE3 -> ∑ QEnxn

Wed, 06/22/2011 - 13:57 | 1392414 bankonzhongguo
bankonzhongguo's picture

Cocaine's a hell of a drug.

http://www.youtube.com/watch?v=CQXDpxAKXNE&feature=related

 

 

 

Wed, 06/22/2011 - 14:00 | 1392433 camaro68ss
camaro68ss's picture

Cocanine is for bitchez, its all about shotting meth, its all the craze

Wed, 06/22/2011 - 14:10 | 1392493 tmosley
Wed, 06/22/2011 - 14:39 | 1392606 j0nx
j0nx's picture

WTF is shotting meth? Do you mean shooting meth or is shotting some new kind of way to drink meth?

Wed, 06/22/2011 - 14:49 | 1392667 blunderdog
blunderdog's picture

Give him a break, man, he was tweekin' when he typed that.

Wed, 06/22/2011 - 13:59 | 1392424 Shock and Aweful
Shock and Aweful's picture

And so it continues....until it can't any longer...

 

Then what?

Wed, 06/22/2011 - 13:59 | 1392430 YesWeKahn
YesWeKahn's picture

This must be the QE3 everyone was talking about.

Wed, 06/22/2011 - 14:25 | 1392534 Dr. Richard Head
Dr. Richard Head's picture

Everyone?  I was traveling down south a few months back and had to stay the night at a Lexington Kentucky Embassy Suites.  It just so happens that Bank of America was having a party for their bankers (commercial and home) to show their employees their appreciation.  Being a smoker, I stepped outside to have a smoke and happened upon a group of those bankers outside as well. We all started chatting over the normal polite conversation that ensues when people first meet.  When I found out that they were bankers and had an opportunity to ask a question of them I asked, “So do you think the Fed will roll QE3 out at the end of June?”  The look on their faces was as if I asked them a question about quantum physics. 

One of the bankers finally said, “QE?  Are you talking about that road in Toronto?” 

I fieldstripped my cig, threw it into the trash, and just walked away laughing my ass off.  We is fucked ladies and gentleman. 

Wed, 06/22/2011 - 14:41 | 1392626 Silver Dreamer
Silver Dreamer's picture

Most bank employees are mindless sheep too.  Who thinks anymore anyway?  It's so outdated...

Wed, 06/22/2011 - 15:05 | 1392701 Dr. Richard Head
Dr. Richard Head's picture

Indeed.  Sometimes the idea of a nonthinking exsience seems like such bliss.  It sucks seeing through the lies in every media outlet and the ignorance of the people that follow those lies.

 

Bunch of fractional reserve pussy automatrons.  Sighhh

Wed, 06/22/2011 - 15:45 | 1392886 GtownSLV
GtownSLV's picture

The Russians and Chinese are. Soon they'll be selling US paper by the ton!

Wed, 06/22/2011 - 14:40 | 1392629 macholatte
macholatte's picture

 

 The people at the local branch office are no better than the guy on the assembly line. It's still factory work. But I bet a UAW guy can tell you a lot more about the mechanics of cars and trucks than a branch manager can tell you about money. These are not the droids we're looking for.

 

Nothing in the world is more dangerous than sincere ignorance and conscientious stupidity.
Martin Luther King, Jr.

 

 

Wed, 06/22/2011 - 14:59 | 1392719 Dr. Richard Head
Dr. Richard Head's picture

I would expect it from the tellers of course.  However, I went to transfer my money from a large bank (had the acocunt prior to my understanding of monetary and fiscal policy) and I wanted to talk to the Branch Manager about their Profit and Loss statement.  I had some questions about exposure to a variety of different risk assets that stood on their sheet.  The same look of utter confusion was upon her face. 

I still went with that bank since they have a strong Texas Ratio and they were a smaller regional bank, but it pisses me off that someone working in the financial industry has no fucking clue what the hell they are doing other than selling "savings" accounts. 

Wed, 06/22/2011 - 15:23 | 1392811 cgbspender
cgbspender's picture

One of my roommates once asked the branch manager of a local Sun Trust if the bank was solvent. She displayed a confused look and replied "What does solvent mean?"

 

True fucking story.

Wed, 06/22/2011 - 15:51 | 1392893 Raymond Reason
Raymond Reason's picture

Had a conversation with the manager of my local bank a while ago.  He said he'd heard the term "fractional reserve banking", but wasn't sure exactly what it refered to . 

Wed, 06/22/2011 - 14:39 | 1392608 j0nx
j0nx's picture

This is not the QE3 you're looking for. Move along.

Wed, 06/22/2011 - 14:00 | 1392434 dcb
dcb's picture

Qe to infinity and beyond!!!!

Wed, 06/22/2011 - 13:59 | 1392442 virgilcaine
virgilcaine's picture

'twist' operation starting, just as a trillion in eu debt is about to go bust. See you at Dawg 8k.

Wed, 06/22/2011 - 13:58 | 1392445 statlawyer
statlawyer's picture

Here comes the levitation lolz

Wed, 06/22/2011 - 14:00 | 1392452 yogibear
yogibear's picture

True to Bernanke's college thesis he will print. Too bad if he's wrong. Those in the Whitehouse and in the media will blame somebody else.

Wed, 06/22/2011 - 14:12 | 1392479 Ahmeexnal
Ahmeexnal's picture

Greeks seem to have already been setup by the power-elite -and their lackeys- as the culprit: lazy, dirty, cheating, backward, stealing money from "hardworking northern people" *puke*.  Racism at it's most vulgar display.

The solution the power-elite have planned: Take the land and gold from the greeks, and ship the greek people to Fukushima.

Wed, 06/22/2011 - 14:46 | 1392641 macholatte
macholatte's picture

The community organizers have been paid off. Move on to Italy.

Wed, 06/22/2011 - 14:06 | 1392464 LawsofPhysics
LawsofPhysics's picture

Perpetual QE is an important part of financial repression.  Unfortunately, only a relative few benefit.  "Mark to unicorn" accounting etc. will continue until Atlas shrugs.  Hedge accordingly.

Wed, 06/22/2011 - 14:06 | 1392465 gwar5
gwar5's picture

FRBNY, misdirection from Benny and the inkjets.

Bernanke must really be feeling heat for all the QE.

He'll get over it.

Wed, 06/22/2011 - 14:07 | 1392467 101 years and c...
101 years and counting's picture

$32 billion?  ROFL.  Wasnt the last "QE Lite" portion of the POMO schedule about $12 billion for a month?

Wed, 06/22/2011 - 14:17 | 1392505 Dr. Richard Head
Dr. Richard Head's picture

The required dosage just keeps getting bigger and bigger, just like my pile of gold and silver. 

Wed, 06/22/2011 - 14:08 | 1392471 Josh Randall
Josh Randall's picture

QE Lite = great POMO, less filling

Wed, 06/22/2011 - 14:11 | 1392483 starfish
starfish's picture

As Expected? I remember Jim Rickards bringing this up a few months ago and Tyler having a disagreement with him regarding the whole stock and flow thing.  I suppose it's a moot point. It is the way it is...

Wed, 06/22/2011 - 14:41 | 1392615 HpDeskjet
HpDeskjet's picture

True, actually Bernanke himself already said months ago that they were planning to keep the size of the balance sheet unchanged... Compared the last 8 months this means tightening for about $80 bln per month, very curious how risky assets will hold up!

 

 

Wed, 06/22/2011 - 14:16 | 1392496 SRV - ES339
SRV - ES339's picture

So, Rickards was right... QE to infinity!

Just as expected

... didn't you take the other side (outright QE 3) on this Tyler?

Wed, 06/22/2011 - 14:28 | 1392576 Everybodys All ...
Everybodys All American's picture

QE lite ... means anytime I feel the need. QE Infinite.

Wed, 06/22/2011 - 14:23 | 1392548 Everybodys All ...
Everybodys All American's picture

This will end in a spectacular crash ...

Wed, 06/22/2011 - 16:07 | 1392958 GoldVsFRNdotCOM
GoldVsFRNdotCOM's picture

I absolutely hope so, one the likes of which humanity has never dreampt of.

Wed, 06/22/2011 - 14:29 | 1392579 baserunr
baserunr's picture

Don't poor Brian Sack and his teenage assistants even get a vacation?  They too are doing God's work you know.  Just ask Lloyd!

Wed, 06/22/2011 - 14:32 | 1392594 kito
Wed, 06/22/2011 - 14:35 | 1392605 High Plains Drifter
High Plains Drifter's picture

WTF !  Again with the QE lite? 

Wed, 06/22/2011 - 15:35 | 1392840 SeverinSlade
SeverinSlade's picture

I prefer "QE Mini-me"

Wed, 06/22/2011 - 14:48 | 1392639 I am a Man I am...
I am a Man I am Forty's picture

bill's been wrong about the US bond market all year, not sure why he will be right this time

 

and one operation a month, seriously?  the markets not gonna like that

Wed, 06/22/2011 - 15:51 | 1392910 alexanderstollznow
alexanderstollznow's picture

and one operation a month, seriously?  the markets not gonna like that

it is one op per month in each of 7 maturies.

Wed, 06/22/2011 - 15:53 | 1392919 alexanderstollznow
alexanderstollznow's picture

and one operation a month, seriously?  the markets not gonna like that

it is one op per month in each of 7 maturies.

Wed, 06/22/2011 - 14:47 | 1392662 chancee
chancee's picture

Gross is full of it.  He just want Treasuries to stop rising since he's short.

Wed, 06/22/2011 - 16:55 | 1393131 alexanderstollznow
alexanderstollznow's picture

if he wanted treasuries to stop rising, why would he be saying the Fed will announce further QE??

Wed, 06/22/2011 - 15:27 | 1392818 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Operations QE Light and Budget Increase Light commence as inflation and unemployment expectations are raised.  No one should be surprised.  This is simple Bernanke policy.  Man the helicopters, we have food stamps to drop.

Wed, 06/22/2011 - 15:54 | 1392922 sbenard
sbenard's picture

You mean Wall St will have to conduct the Pollyanna Party with only about 1/3 to 1/4 of its usual free money influx? They are not going to be happy!

Wed, 06/22/2011 - 23:21 | 1393764 HungrySeagull
HungrySeagull's picture

With what? Wet dollar bills fresh from the  mint? No, they are going to do it with oat meal instead of a western omlette and the Polyanna is just going to have to like it.

Wed, 06/22/2011 - 15:58 | 1392925 Raymond Reason
Raymond Reason's picture

Maybe i'm missing something here based on the comments.  But this QE lite is not increasing the money supply, correct?  It is only preventing a contraction of the money in circulation. 

It is akin to paying interest only on a home-equity loan.  The debt doesn't increase or decrease.  People seem to be interpreting this as more easing.  Unless i'm missing something?

Wed, 06/22/2011 - 16:53 | 1393121 alexanderstollznow
alexanderstollznow's picture

that is exactly right, and no you are not missing anything.  the Reinvestment policy is not "QE Lite". it is not QE at all.  just dont tell the ZH flock of sheep that, however, as they mostly have a desperate need to believe that QE will continue as per the last years rantings.

Wed, 06/22/2011 - 15:57 | 1392934 buzzsaw99
buzzsaw99's picture

the coupon is better in the belly. roll ponzi roll.

Wed, 06/22/2011 - 18:23 | 1393344 mfoste1
mfoste1's picture

derrrrrrrr isnt this QE3?

Wed, 06/22/2011 - 22:56 | 1393703 Mediocritas
Mediocritas's picture

I think we should call it QE-Roll (QER).

The Fed can't afford to reduce it's paper holdings because to do so means sucking cash out of the economy (deflationary). So it will keep rolling its paper position on and on and on (particularly TSYs).

QER will continue indefinitely, it has to.

[edit] I'd also add that as MBS and other ABS paper slowly sunsets, TSY paper will roll in to replace it, keeping net value the same. Translating this into the real world, it guarantees that the govt will announce programs to replace those launched by the private sector in creating ABS in the first place. In other words, Fannie Mae and Freddie Mac will be with us forever and may even grow. If they don't grow, some other monster GSE will be created to collect rent / interest from all the TSY owned homes being swapped out of Fed ABS in exchange for TSYs.

Wed, 06/22/2011 - 23:19 | 1393766 HungrySeagull
HungrySeagull's picture

There be monsters. If the United States was like Monster Inc. Movie, we have yet to meet the real one.

 

It will be a scream. Trust me on this one.

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