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NY Fed On Mortgage Purchases: Smaller, Less Frequent
Statement Regarding Purchases of Agency Mortgage-Backed Securities and Agency Debt
September 23, 2009
On Wednesday, September 23, 2009, the Federal Open
Market Committee announced that the Federal Reserve will purchase a
total of $1.25 trillion of agency mortgage-backed securities and up to
$200 billion of agency debt. The Committee will gradually slow the pace
of these purchases in order to promote a smooth transition in markets
and anticipates that they will be executed by the end of the first
quarter of 2010.
To implement
these decisions, agents acting on behalf of the Federal Reserve Bank of
New York's Open Market Trading Desk will gradually reduce the average
weekly purchase amounts of agency mortgage-backed securities, starting
with purchases conducted during the reporting week beginning Thursday,
September 24, 2009. Additionally, the Open Market Trading Desk will
gradually reduce both the size and frequency of individual agency debt
purchase operations, with the frequency of agency debt purchases
remaining, on average, once per week before declining to once every two
weeks at some point during the first quarter of 2010. All other terms
of the purchase programs remain unchanged.
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Contrarian view on the Dollar: Reading the various ZH posts today, and reviewing dollar sentiment showing some reports at 97% bearish the dollar. Is anyone else but us a little skeptical about short term direction of the dollar. Short term, the trade that will hurt the most people -- is if the dollar rallies and unwinds are forced (not withstanding the reasons). Thus, we agree, the longer term fundamentals of the dollar are weak, but short term, we're being careful about continued selling of the dollar in blind carry positions. Comments? Good luck everyone.
"If" (cough) WFC has any "problems" or some other bank/ins then a Dollar pop will work out nicely.
I'm on your side. Too many forces lined up against Ben including 97% bearish, G20, etc. The dollar can only move relative to other currencies. Methinks the other currencies have had about enough.
Wouldn't this make trader covering their short position in USD? Personally, I thought the FED statement would reverse the dollar slide for a day or so. But looking at the market movement, I gguess they proved me wrong
November 1, 2009
"Agents acting on behalf of the Federal Reserve Bank of New York's Open Market Trading Desk will gradually ramp up the average weekly purchase amounts of CRE, starting with purchases conducted during the reporting week beginning Thursday, November 5, 2009."
100% agree, the Fed will use a sideways 'off the books' way to keep the scam going. Just hope the world never realizes the tens of trillions in the Federal reserve's off balance sheets, because if/when that happens the dollar goes Zim-Bob.
No way they end MBS purchases in Q1. These will go on until 2011, if not longer.
have to agree with you.
Ghost, I agree that this is exactly what they would "like" to do. I'm not sure if they will have the political capital remaining to do so.
The dam must burst at some point, Ben has over-stayed his welcome on the dollar's throat. Citizens are starting to see and feel this.
True, political pressure would stop them, but only temporarily. Here is how I see it playing out:
They start slowing down purchases to $15B a week, but, oops, there are no other buyers, so the mortgage basis starts to widen (and drags USTs up with it).
To bring in the basis in, the Fed ramps up buying at the same pace it did, $25B a week.
They hit their $1.35T allotment by mid-Jan.
They stop purchases, and the basis explodes.
The lobbyists from the NAHB, MBA, etc pounce on Washington to end the pain of 6.5% mortgages.
The purchases resume at $20B a week.
The dollar explodes in a fireball.
The dollar is due for a rally.
Paulson, Rubin, Lord Blankfein, Jamie Dimon, Ken Lewis, and Greenspan are due for a lynching. Dick fuld is overdue for a flaying. Ken Lay and his henchpersons are overdue for a date with the rack.
Detroit is due for a defense.
The Pirates are due a winning season.
I'm due, overdue, to break 100 and double birdies back to back.
If you seek justice, you must wait till to you get to heaven.
What about Bernanke? Are you saving more severe punishment for "Gentle Ben"?
Ken Lay...... overdue for a date with the rack.
you must be related to that chick with the you tube video who was going to stiff BAC and its ceo, Ken Lay.
The decline of the dollar is due and will be due to much more pressing issues than the Fed stopping it buying of Mortgage Backed Securities. I can count 23 Trillion of them right now. (the expected amount of the TARP bailouts) This one issue is just a needle in a bale of hay)
Right, they are going to stop buying MBS, sure. They might even start raising interest rates any day now. Oh, and unhooking GM and AIG and C and fred/fan from life support. Any day now...
Seriously, do you really think any of this is going to happen? Do you think they spent all that money buying up the stuff to let it come crashing down unsupported because there are no private buyers?
And as for dollar bearish sentiment keep in mind that every equity, bond, every paper instrument of any kind is a bet on the USD. On the long side. So I figure the market sentiment is about 99.999% USD bullish at this point.
although i agree the short dlr trade is crowded......
there is only one little factor stopping me
from buying back my short position...
...There is a very very big player waiting for the dlr to strenghten a little bit so he can diversify out of his huge long dlr position into a basket of non-dollar....the chinese central bank(and japanese and the rest of exporting countries)...that is why there will be no letup in the gradual (or sharp) decline in the dlr!
every time the dlr goes up...they will be there!
Didn't your last post just say "In other news, the cremation of the formerly reserve currency known as the dollar will be held in the Federal Reserve's back yard at a convenient date"? Now this post says "This can't be good for the dollar bears and the liquidity addicts"?
Which is it?
The Fed has turned "kick the can" into an art form. They know that no pre-emptive money printing will stop the conflagration to come, so they will extend this program to infinity and beyond (purchasing smaller and smaller amounts) until the next bubble bursts then they can announce an extension as opposed to restarting a program they have already shut down.
If the market tanks buy escalator derivs and sulk out till the last two red days in october.Then sell on the upswing just before the christmas cola ads. And you my son will be a Santa with the sack full of the largest cahooners this side of pitsea market. I promise.
My perception is that the Fed marches right up to the precipice, then stops just short of it. No interest raise, we will continue buying MBS, but will gradually slow the pace of the purchases. They see gold over $1,000.00, DXY sinking; in other words, they see the precipice, they are not oblivious to it. Not exactly a withdrawl of liquidity, not exactly a commitment to further support. Can, meet foot.
My fathers cousin owns 6 strip malls in suburban Atlanta. Vacancy rate is about 75%. The 3 lenders that he works with to finance the properties are just taking the rent monies from the current lease agreements and adding on an additional balloon to the end of the finance agreement. It's becoming the standard practice with his friends properties also.
Easy peasy.
Good luck Ben with exiting the MBS market, considering you make up 80% of it. Ya, good luck with that. MBS = RIP.
Yes, then the dollar will SOAR, as will treasuries. Everything else will end up in the tank.
if the fed's lips are moving it's lying....i can't believe they even waste the paper to publish their sack of shit lies....
end mbs purchases? end qe? what a crock....there is absolutely no way to exit without a calamity.....ever....qe ends when the dollar is worth nothing....
smart money is leaving the building the way the clinton's did the white house - steal whatever is not nailed down and loot for all it's worth...
Rest of the world getting jump with their hands on the trigger. Bernanke is on his knees blindfolded praying vigorously that nobody gets a twitch
can somebody explain please:They already have purchased that amount. So is that:1-an increase of another 1.5 tri to their balance sheet;or 2-a continuation of the program(meaning whatever left from the original program)?,
Is there a reason everyone is running for the exits just now? Dow, Dow, Dowwwwwn!
Dude, finally some consistency in big block sales this afternoon. Word on the street is that the DX got the swine flu shot and is feeling healthy.
Again, the trade that will hurt the most managers, is a dollar rally. And, if this occurs, managers who blindly sold the dollar on a carry trade (and gone long every other asset class) will be "forced to unwind" those trades on an inverse trade. Worse, they will be forced to do this into declining bids/prices. Also, couple this scenario with stocks, commodities, and currencies rolling over, plus new shorts initiating, and longs trying to sell to "protect" their recent profits from the last 3-6 months -- and you have the making of a real reversal and selloff. The Fed has truly put itself, and this economy, in a compromised box. Good luck.
They've had enough.
Sept. 23 (Bloomberg) -- Apollo Commercial Real Estate Finance Inc. and Colony Financial Inc. both halved the size of their initial public offerings, a sign that investors remain wary of plunging into commercial property debt.
Apollo Commercial, a New York-based real estate investment trust set up by Leon Black’s Apollo Management LP, cut its stock sale to 10 million shares from 20 million, according to a U.S. Securities and Exchange Commission filing. Colony Financial, a Los Angeles REIT set up by Thomas Barrack’s Colony Capital LLC, reduced its offering to 12.5 million shares from 25 million, according to a separate filing.
@#77569
Couldn't agree more. 23 Trillion into the market for the money multiply effect. How much of this is being hoarded by zombie banks? If so, then once relwased look out, me thinks
Reducing purchases of MBS bonds makes sense. Otherwise, why would the Federal Reserve wish to perform a revolving door operation of purchasing MBS bonds, while at the same time sell them in reverse repo operations? That could work if there was a hold-to-maturity commitment, but otherwise . . .
So if the Fed stops buying MBS, will mortgage rates go up?
IF they stopped buying MBS, mortgage rates would go up, probably by 100bps right off the bat.
Whoever jumped on stocks and dumped the dollar after the announcement must sure be feeling silly at the moment.