This page has been archived and commenting is disabled.

Open Market Operations And Statistics

Tyler Durden's picture




 

Zero Hedge stirred up a hornet's nest recently by bringing to popular attention Chris Martenson's post highlighting the very rapid "uptake" via Permanent Open Market Operations of a Treasury CUSIP that had been auctioned off shortly prior. The article angered among others such bloggers as former employee of the NY Fed John Jansen who penned a post titled "Monetizing the Debt: Disinformation in the Blogosphere" whose conclusion was that despite the 5 day turnaround to monetization of the particular 7-year CUSIP which represented roughly 47% of the total purchased by primary dealers "there is absolutely nothing unique or special about today’s transaction by the Open Market Desk." Subsequently Jansen proceeds to nitpick semantics but we will let that slide as it is not relevant for the time being.

Yet what neither Jansen, nor Yves Smith, who picks up the baton and calls Zero Hedge's style "hyperventilatory" (we most certainly do not mind - our style such as it is, hyperventilating or otherwise, at least brings broad attention to topics which may or may not be of relevance to the general public, as opposed to a closed group of highly sophisticated economists and financiers who enjoy debating among each other and perpetuating their closed group relationship, with no informational leakage into the broad arena - a theme that has persisted for many years and is significantly counterproductive to the ambition of bloggers to be an alternative venue to mainstream media), focus on, and what was the primary argument of my, and Chris Martenson's post, is that Ben Bernanke is essentially monetizing debt, despite potentially perjurious claims to the contrary, all within the legal framework of primary deal intermediation and the disadvantaging of indirect dealers (who are very hard to be seen at the table these days as is). Neither Jansen nor Smith point out the fact that a primary dealer, whoever it may have been, would purchase CUSIP 91282LD0 on July 30, and then sell it at a loss less than a working week later (purchased at 99-26 and sold at 99-07). Absent a backstop from another entity it would seem a rather  imprudent thing to do from a fiduciary point of view, especially with such a brief turnaround timeframe: primary dealers have the balance sheets to be patient when they acquire Treasuries.

All that being said, Zero Hedge decided to perform a statistical analysis of time series variance between Treasury auctions conducted in 2009 and the subsequent Permanent Open Market Purchases, in which we analyzed the size of the OMO transaction, the number of days passed between a certain CUSIP being auctioned and becoming purchased by the Fed, the percentage of primary dealer purchases as a total of the entire Competitively Accepted amount, and the percentage of the Primary allocation that would end up being purchased subsequently by the Fed in the OMO-to-Auction timeframe. The results were surprising.

But first, I will present the data set that Zero Hedge created with the assistance of reader Phaesed. The chart below highlights all Bond (not Bill) Treasury Auctions conducted in 2009, segregated by auction date, and highlighted by tenor.

Some datapoints: there has been $1.1 trillion in Bonds offered YTD, of which $1,156 billion has been accepted. Of this total, $600 billion has gone to primary dealers. The primary allocation has represented a (simple) average of 55% of the total bonds allocated competitively. For readers who would like to play around with this data, it will be posted shortly to google spreadsheets for open source enjoyment.

Next, Zero Hedge compiled all the YTD Open Market Operations Data, and filtered it by Bond issues auctioned in 2009, and subsequently purchased by the POMO program.The raw data is presented below:

Some facts: the Fed has purchased roughly $240 billion in OMO since QE was announced in March: on par to purchase $300 billion as the program was initially intended to expire by the end of September: according to media reports as of now there will likely not be an extension due to the "improving economy." (We have not focused on agencies in this report: we will perform that analysis at a subsequent date, yet one can argue the vast majority of Fed buybacks has occurred in the MBS realm)

Of this $240 billion, almost half, or $112 billion has been targeted at treasury issues auctioned off in 2009. The chart below demonstrates the global universe of all OMO purchases of 2009 issues indexed by total purchase size, as well as number of days of OMO transaction since original auction (horizontal axis) - this is the key topic in question, which both John and Yves seem to take offense to. Of course, while a normal distribution would not show a significant preference to a lumped clustering, the vast majority of the treasuries purchased by the Fed has been within a few weeks at most of the original Treasury auction.

The size of the various circles is a relative indication of the percentage the OMO purchase representated as a function of the original primary dealer allocation: potentially an indication of how unwilling the primary dealer may have been to purchase a given issue absent a backstop guarantee from the Fed that shortly after the auction the issue would be acquired via OMO. 

As the chart is somewhat noisy on the tail end, we have cleaned it up once by removing any OMOs that were less than $1 billion in size. The data is as follows:

What becomes notable is the mentioned clustering around the proximal side of auction-to-OMO time, with greater amounts purchased by the FED for CUSIPs that had large primary dealer allocation.

Last we perform one final filtration of the data, to remove any issues that were repurchased by the Fed more than 30 days after the Treasury auction:

The startling conclusion: $32 billion of Treasury Bonds spread across 7 CUSIPs, were purchased by the FED within 10 days of their initial auction and allocation to primary dealers. The amount purchased by OMOs represents an average of 32.4% of the total allocated to primary dealers in the respective auctions. Furthermore, almost two thirds of total OMO Operations for bonds issued in 2009, or $62 billion, affects Bonds issued within 30 days of the OMO purchase. These purchases account for a total average of 29% of the total amount allocated to primary dealers. While one may make the argument that on the run bonds are preferred on average by the Fed for purchasing and by the primary dealer community for selling, the data presents a marked skew in the Fed's desire to monetize very recently issued Treasuries.

The key questions remain: allocations to primary dealers in 2009 Bond auctions is an undisputed majority (55%) of all auctions - this is troubling due to the the recent change in the definition of indirect purchasers as well as the markedly reduced interest of foreign buyers such as China and other indirects, for US Treasuries. Could a reason for the Chinese lack of appetite be due to the fact that while primary dealers represent not just a majority of all Treasury purchases, that these dealers may also have an implicit understanding that come hell or high water for auctions that lack indirect interest, the Fed could potentially make any dealers whole on purchases and subsequent sales at a loss such as the highlighted CUSIP 91282LD0 example (explicitly, at a loss for taxpayers who have to fund the primary dealers shortfall, in this case the difference between 99-26 and 99-07)? Would the Chinese be interested in playing in a rigged playing field when indirects are potentially impaired vis-a-vis direct purchasers? Furthermore, is Bernanke pulling a Clinton and while claiming under oath the he is not monetizing debt, he is effectively doing just that on well over $30 billion in Treasuries, which the Fed acquires within 10 days of issuance? And lastly, is the rapid uptake by the Fed a means to goose up auctions which have a potential likelihood of failure: the 7 Year in question came hot on the heels of a 5 Year that for all intents and purposes was quite close to a failed auction? Absent an implicit backstop, which everyone knows the Fed is very keen on making these days: as the SigTarp demonstrated, to the tune of tens of trillions of dollars, what is the likelihood the 7 Year would have fared as well as it did, had not the primary dealers really stepped up, for reasons known and unknown.

Zero Hedge is not making any claims, but merely asking questions. And while we appreciate the opinions of self-professed experts such as John Jansen, these answers should really come from the proper authorities - the US Treasury and the Federal Reserve of the US.

As time allows, Zero Hedge will next conduct a comparable study on Agency and MBS debt repurchases by the Federeal Reserve.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Sat, 08/08/2009 - 21:35 | 30624 Anonymous
Anonymous's picture

"our style such as it is, hyperventilating or otherwise, at least brings broad attention to topics which may or may not be of relevance to the general public, as opposed to a closed group of highly sophisticated economists and financiers who enjoy debating among each other and perpetuating their closed group relationship, with no informational leakage into the broad arena - a theme that has persisted for many years and is significantly counterproductive to the ambition of bloggers to be an alternative venue to mainstream media"

And since the quarrel
Will bear no color for the thing he is,
Fashion it thus: that what he is, augmented,
Would run to these and these extremities;
And therefore think him as a serpent's egg,
Which, hatch'd, would as his kind grow mischievous,
And kill him in the shell

Julius Caesar Act 2, scene 1, 28–34

Sun, 08/09/2009 - 11:06 | 30857 Anonymous
Anonymous's picture

Safracide is painless, it brings on many changes

Sun, 08/09/2009 - 13:40 | 30933 Anonymous
Anonymous's picture

Actually, the line is:
Without pain, without sacrifice, we would have nothing.

Sun, 08/09/2009 - 14:12 | 30945 Pat Shuff
Pat Shuff's picture

Is that a Marty mashup?

HotLips: Just another piece of the Pi.

Sat, 08/08/2009 - 21:39 | 30626 Sisyphus
Sisyphus's picture

An off topic request.

TD/Marla, could we please have the hit counter/sitemeter back? I use to use the numbers to buy my lottery tickets. And now I am clueless as to what to buy. Please assist.

Sat, 08/08/2009 - 21:44 | 30627 Anonymous
Sun, 08/09/2009 - 00:53 | 30703 Apocalypse Now
Apocalypse Now's picture

Interesting article.  Conflict of interest ethics wavers were signed, what does that mean - You are free to violate ethics rules?  Their spokesmen stated they acted ethically (Goldman & Paulson) and that Paulson had to speak with a number of different firms during the crisis.  But the article stated they spoke at least 2 dozen times as recorded in his calendar and met on several occasions.  The reporter should have compared the # of times Paulson spoke with Lloyd to the # of times Paulson spoke with the other CEO's of banks.

Paulson originally stated he would be extremely ethical and operate at arms distance, he sold his GS stock before joining the treasury (tax free) .  Then he let GS's two main competitors Lehman and Bear Stearns fail, gave out 100% of swap contracts through AIG and loaned $10B to GS.

Can you imagine how much dirt Lloyd probably had on Paulson related to how operating profits were made (Flash trading / HFT / Bid Rigging / huge fixed income spreads).  If GS went down, there would be a government takeover and an investigation of their books.

Sat, 08/08/2009 - 22:04 | 30636 buzzsaw99
buzzsaw99's picture

Intent has nothing to do with it. BB sez he is easing to help the mortgage market, which is FUBAR, and everyone knows it. Meanwhile foreign bond vigilantes are baying out in the wilderness to no effect due to rampant monetization by the fed and treasury. Does anyone not believe that there is collusion to keep gubbermint borrowing costs down and the stock market up? Please. This will end badly.

Sat, 08/08/2009 - 22:17 | 30641 Anonymous
Anonymous's picture

TD, there is no comparison between your work and mindless posts of Yves or the Fed stooge Jensen. It is amazing you went through all the data and presented facts. We will let the useless bloggers such as Yves Smith to just post their worthless commentary on other people's posts or research. If other bloggers actually spent the time to do some research once a week I would check them out more often than ZH.
ZH so far is the best financial blog, period. Thanks to TD and other contributors to this data, as always.

Sat, 08/08/2009 - 23:18 | 30665 Anonymous
Anonymous's picture

This is Cindy (too lazy to log in)

Look, Yves is all jealous b/c no one reads their blog anymore.

BBBOOORRRRRRRIIIIINNNNGGGG

Sun, 08/09/2009 - 00:11 | 30687 lizzy36
lizzy36's picture

I never understand why it is necessary to verbally trash your peers in an attempt to make your self look good. I think it is far more effective to merely do better work than your peers (see this post for an example of how that works), and leave it at that. 

Yves work is not mindless. Clearly, ZH has i different purpose and thus a different style than Yves. That doesn't negate the merit of Naked Capitalism

In the early days of ZH, Yves was good to Tyler.  He contributed content to Naked Capitalism which no doubt allowed Tyler to grow his readership.

Perhaps, ZH is the best financial blog (for the record i think the work Tyler does is extradionary) but Tyler is not omnipotent.

Sun, 08/09/2009 - 01:22 | 30716 Anonymous
Anonymous's picture

I agree. I think Yves has done a tremendously good job with her blog. Her style, though, is to view things from a more detached perspective. Her site doesn't have the hyper-frantic pace that ZH has, but it's a very good place to start every morning to get a nice overview of the forest. ZH, meanwhile, does a great job of examining the state of the trees.

I don't know why someone would want to focus only on one of them to the exclusion of the other.

Incidentally, I also found ZH through nakedcapitalism.

Sun, 08/09/2009 - 02:57 | 30755 Anonymous
Anonymous's picture

Yves is writing a book currently, I seem to remember. She rocks IMO.

Sun, 08/09/2009 - 01:23 | 30718 Anonymous
Anonymous's picture

I think that's too harsh. Yves Smiths's blog is very good. Nowhere near as good as ZH (nothing is) but good all the same. I thought it was a shame for Yves to publicly criticise Tyler in such a condescending manner but also a shame that Tyler bit back.

They're both good blogs which compliment each other as they seem to have similar purposes -- providing a counterpoint to mindless MSM propaganda. ZH would be too radical for many people and perhaps come across as immature. Conversely, NC would be too conservative and boring for others.

For the record, if I had the opportunity to share a few beers with Tyler I would tell him that his biggest threat is himself. 99.99% of people who receive sudden attention and kudos cannot handle it. Their egos spin out of control and they turn into wankers. I really hope this doesn't happen to the human being behind Tyler. Perhaps it has already happened to Yves Smith.

Long live ZH and long live Naked Capitalism.

Sun, 08/09/2009 - 14:55 | 30972 Anonymous
Anonymous's picture

Agree that Yves provides some good information and commentary. When I read the post wherein she criticized ZH, I too thought it was much too condescending. However, I don't agree that ZH "bit back," if I correctly understand that to mean that the response was improper just because ZH made it or that it was too snarky. The criticisms from Yves and the Jansen fellow required a response, and ZH did that in a characteristically informal but good-natured and substantive manner.

Sun, 08/09/2009 - 19:43 | 31139 Anonymous
Anonymous's picture

"...our style such as it is, hyperventilating or otherwise, at least brings broad attention to topics which may or may not be of relevance to the general public, as opposed to a closed group of highly sophisticated economists and financiers who enjoy debating among each other and perpetuating their closed group relationship, with no informational leakage into the broad arena - a theme that has persisted for many years and is significantly counterproductive to the ambition of bloggers to be an alternative venue to mainstream media"

C'mon... surely that qualifies as biting back?:

"closed group... who enjoy debating among each other and perpetuating their closed group relationship with no informational leakage... significantly counterproductive to the ambition of bloggers..."

TD could have written: "it's a shame that Yves decided to wade in as she produces a solid blog." THAT'S not biting back...

Mon, 08/10/2009 - 10:46 | 31451 Cheeky Bastard
Cheeky Bastard's picture

she missed the point completely, while attacking ZH, TD and us who comment here on a personal basis via ad hominem arguments. Her lack of understanding of TDs post about Fed's repurchasing of Treasury Bonds from PDs resulted in her calling this whole blog a big conspiracy theory get-together. And her citing of Jensen as a legitimate and un-biased source is ridiculous given the fact that Jensen worked for NYFBR. She missed the point of that post because she did not understand that it was not a claim, but a question why does the FED repurchase the bonds just a few days later from their issuance. And her argumentation that the FED might have been purchasing older stacks of PDs TBs is completely untrue given the FACT that the CUSIP number of the issuance from the auction is the same number as the CUSIP number of the purchased amount of bonds. She missed the point completely while insulting all of us here on a personal basis. While i agree that her blog offers some good information most of the post i have been reading there are just re-cycled stories which were published in some MSM outlet days before they were posted on NK. And most of the articles there are about the macroeconomic picture of the US and the World and offer nothing more than a black-white type of argumentation and conclusion which we can get on any other blog site, newspaper site or on YouTube. It is stupid of her and immature to comment on the things she a) does not understand and b) does not what they mean when they were written. She can trash and bash TD and ZH all she wants, and call us TDs monkeys and whatnot, but THIS is the best blog on the Internet simply because of the fact that it explores the tiny and sophisticated market segment in a new and attractive way. Oh and BTW, most of these attacks started right after ZH got a award as the best financial blog on the Internet. Coincidence; maybe, but the fact is that the attacks on ZH started shortly after that. Her ego got in the way of her thinking and she has discredited herself by her style and her insults.

Sat, 08/08/2009 - 22:20 | 30643 Anonymous
Anonymous's picture

I fear Tyler Durdin and his ilk may find themselves among the 1st inmates at the FEMA camps.

I'd put money on their books then, but fear will win the day.

Until then, blogs away!

Sat, 08/08/2009 - 22:35 | 30646 Anonymous
Anonymous's picture

This is great shit, meticulously documented, falsifiable, what the world needs now even more than love sweet love but the adversarial tone makes me sad. TD may be the most rad just now but there's room for Yves and John Jansen too. Divergence and interaction is what distinguishes blogs from 1-way media bullhorns. We now have J.S. Mills' ideal of discourse because three of our most trustworthy minds disagree. I don't give a shit who's right yet, I'm just so happy that the days of ex cathedra pronouncements from asskissing journalists are gone. It's not a competition, it's proof we've won. They'll never control what we know again. Group hug!!!!

Sat, 08/08/2009 - 22:40 | 30650 Cheeky Bastard
Cheeky Bastard's picture

*hug*

Sat, 08/08/2009 - 23:42 | 30679 Anonymous
Anonymous's picture

I was wondering, though, about the striking synchrony in other bloggers' distancing themselves now from ZH. It might be that while CR does objectivity and Yves does advocacy, ZH goes beyond that to a kind of yippie activism that scares some respectable people. But nothing else can get at the institutionalized corruption we're facing. It might be that more could get done in a lower-profile place. If this gang had some, uh, I dunno, working groups at riseup.net, frinstance, people who know the pressure points, who've vetted each other offline, Who knows what they could accomplish?

Sat, 08/08/2009 - 23:44 | 30680 Cheeky Bastard
Cheeky Bastard's picture

don't prescribe distancing where jealousy fits perfectly 

Sun, 08/09/2009 - 00:04 | 30686 Anonymous
Anonymous's picture

I dunno, these aren't super competitive people. One's seen it all, one's made his pile, one's a chick and chicks don't give a shit about that stuff. Anyway my main topic was matrushkas nested in matrushkas - no matter how nuts you are, there's some things you just won't talk about in front of the whole universe. You need the equivalent of a city club that's everywhere.

Sun, 08/09/2009 - 11:16 | 30863 Anonymous
Anonymous's picture

Competition is a necessary good.

Sat, 08/08/2009 - 22:43 | 30652 Anonymous
Anonymous's picture

If I may comment, being a bond trader : TD, what your data is showing is just pure and simple front running. Dealers, at the end of the day, just want to make money - and they are smart. The treasury issuance calendar is public knowledge, and so also the fed buying program. There was, and is, much *free* money to be made by just being the intermediary and taking some risk between the two events. It is very very tough - if not impossible - for the fed, or the treasury, to enter into any "secret" agreement with primary dealers. But it is pitiable that, at the end of the day, dealers are printing money at the expense of the taxpayers (the MBS purchase program was also very profitable to them but that discussion for another day).

Sat, 08/08/2009 - 22:58 | 30661 deadhead
deadhead's picture

i respect your point of view as a bond trader about the "free" money being made and suspect you are accurate.

as to your statement, "It is very very tough - if not impossible - for the fed, or the treasury, to enter into any "secret" agreement with primary dealers", I mean no disrespect but that is an incredibly naive viewpoint. It's almost like you are attempting a limited hangout approach.

Sun, 08/09/2009 - 05:51 | 30786 Anonymous
Anonymous's picture

that 7 year bond was sold to the Fed 19 ticks lower than it was bought at auction, how did they make money on it?

Sun, 08/09/2009 - 06:14 | 30787 Cheeky Bastard
Cheeky Bastard's picture

i can tell you, but its only speculation( i hate that ); but try this " pre-determined re-purchases with added value to the seller"

Sat, 08/08/2009 - 23:26 | 30670 Anonymous
Anonymous's picture

I want to have your abortion Tyler...I love you.

Sat, 08/08/2009 - 23:32 | 30675 e1even1
e1even1's picture

listening to Stevie Ray Vaughan's - Tightrope right now.

but actually it's more like riding the tiger. just forget about getting off. i think it would be prudent now to revoke Ben's and Turbo's passports. outfuckingstanding column.

Sat, 08/08/2009 - 23:38 | 30677 Al Swearengen
Al Swearengen's picture

Been thinking about this since I read it earlier today...that 7yr auction two weeks back was so odd.  In another time we might have traded into that buzzsaw...the post-game institutional commentary wasn't overboard w/ "this is a sign that the market believes" hyperbole, unlike everyone everywhere after the employment data came out on Friday...the invisible fist

Sun, 08/09/2009 - 00:12 | 30688 Anonymous
Anonymous's picture

Nice work in adding proof to the pudding but I thought everyone knew the FED was monetizing debt. No?

Sun, 08/09/2009 - 00:23 | 30692 madmax
madmax's picture

I feel that the fed indirectly manipulated the stock market by stepping into the 7 year auction in the fashion that it did.   The 7 year treasury auction had the full attention of the stock market that day, especially after the 5 year was poorly received. 

Once the headline numbers were release on the 7 year, the stock market cheered and the 5 year auction was deemed a fluke. 

The fed knew that by the time the details of the 7 year auction were sifted through the stock markets attention would have moved onto the next big thing.

Sun, 08/09/2009 - 01:27 | 30723 Anonymous
Anonymous's picture

Why would the Fed risk screwing the bond markets to save the stock market?

I'm new to this, but I thought that the bond market was an order of magnitude bigger than the stock market, and that t he commodities markets were one order of magnitude bigger than the bond market, and that FX was one order bigger than that.

Sun, 08/09/2009 - 02:04 | 30746 madmax
madmax's picture

The treasury market has known for sometime that the fed was going to monitize 300 billion in UST debt. The big issue here is whether or not there is suffcient external demand for US tresuries to finance our ballooning debt.  The Fed created the illusion that there was regarding the 7 year auction and that apparent demand reassured the market.

 

Sun, 08/09/2009 - 00:25 | 30693 Anonymous
Sun, 08/09/2009 - 01:02 | 30705 Anonymous
Anonymous's picture

Did you work at JPM in a past life? Those guys love their bubble charts....

Sun, 08/09/2009 - 01:21 | 30713 Anonymous
Anonymous's picture

How did you get passed the math question?
A friend needs to know.

Sun, 08/09/2009 - 01:27 | 30722 Anonymous
Anonymous's picture

That would be telling.

Sun, 08/09/2009 - 01:05 | 30706 George Orwell
George Orwell's picture

Tyler, you are quickly becoming THE blog on internet.

 

Can you go back and analyze the OMO data based on the maturity dates of the treasuries?  The reason why I ask is that according to this press release:

 

http://www.federalreserve.gov/newsevents/press/monetary/20090318a.htm

 

The fed is supposed to be purchasing 300 billion of "longer term" securities.  That 5 day flip of the 7 year treasuries is not "LONGER TERM".  Long term is 10 years or more.  The original intent was to lower the yield on the 10 year notes since mortgage rate are indexed based on the 10 year note.

 

We know for a FACT that the treasury department has been selling A LOT of 3, 5, 7 year notes instead of 10 or 30 year notes.  They know that demand is there for the short term notes but not for the term long term.  But if the fed is purchasing a bunch of these short term notes, that means...

 

Well, it means that the SHIT HAS HIT THE FAN.

 

If the Chinese and Saudis are shunning the short term notes, we are in deep shit.

 

Georgeo  Orwell

Sun, 08/09/2009 - 01:27 | 30721 e1even1
e1even1's picture

... and the more active the fed becomes in creating demand, the less non-fed demand there will be due to the articial rate. he almost has to correct equities now to help him with demand. what a perfect mess.

Sun, 08/09/2009 - 04:05 | 30770 Anonymous
Anonymous's picture

Just look at the situation in the UK. The BoE holds the majority of certain gilt issues already...

http://ftalphaville.ft.com/blog/2009/08/06/65761/double-secret-qe/

Once completed, the 175bn GBP QE program will amount to about a quarter of all the gilts currently outstanding.

Interesting times.

Sun, 08/09/2009 - 11:32 | 30870 Anonymous
Anonymous's picture

Game over - stop issuing debt, mfers.

Sun, 08/09/2009 - 01:10 | 30707 Anonymous
Anonymous's picture

So much effort in collecting data and then wasting it with conclusions that make no sense at all, its just silly. It is clear you know nothing about bonds, the bond market, duration, bond holders, the flow of money. All you do is base your analysis on equity markets, where one stock is the same as the other when issued by the same company. Bonds are different and more complicated and you just don`t have a clue.
That is not to say part of your conclusion is not right, but just the way you get there and the amount of confusion created by screaming meaningless sentences in between is just not helping at all to say the least.
You miss the fact that the Fed can only buy what is offered, that they have to take the cheapest offers and can not just buy anything, that the on the run issues are more liquid and therefore cheaper to buy in most cases. And you even manage to conclude away the fact that if PD would have hold on to the issue they bought on the auction at 99.27, they would incur a loss (and a big one that is) selling them at 99.07. Obviously that would not make sense in any book.

One last, but maybe most important observation that you miss: in the auctions that did not go well, primary dealers got most of it. However, in the auction that did not go well, primary dealers only got a handful of the issue compared to others. Now how do you clarify that, if the primary dealers had an agreement with the FED, why did they not be more aggressive? It clearly shows that other participants had a vested interest in this issue, and to make sure they got it they put in a bid on the rich side of the market. It actually blows away your whole argument that FED and PD worked together to make this a successful auction, because it were not the PDs that made it successful.

To bad you blast someone as knowledgeable as John with stupid remarks, rather than making an effort to read what he writes and understand a little of the bond market. It would help you to actually understand what the FED is doing and point out the real things that are undermining the economy, rather than some fake issues that are actually no issues.

Sun, 08/09/2009 - 01:40 | 30728 George Orwell
George Orwell's picture

You are full of crap. Since you know so much about the bond market, can you please clarify why the March 18, 2009 press release from the fed:

 

http://www.federalreserve.gov/newsevents/press/monetary/20090318a.htm

 

Talks about buying 300 billion of "longer term treasury securities" and then the fed turns around and starts buying a bunch of 3, 5, and 7 year notes?

 

The definition of "OPEN MARKET OPERATION" means buying something in the OPEN MARKET.  You can pick and choose WHAT to buy at the open market.

 

The original intend was to keep buying the 10 year notes to drive down the mortgage interest rates.  But they ended up trying to PROP UP the short term notes.

 

From the spreadsheet that Tyler posted, there was hardly any 10+ year notes purchased.  And no, it was not because nobody was selling 10 year notes.

 

George Orwell

Sun, 08/09/2009 - 04:58 | 30775 Anonymous
Anonymous's picture

My point was against the theory that the Fed works with the Pds to guarantee their buys at the auction. This data clearly does not proof any of that. It doesn't stop many of you of fantasizing about it, but that is a different story.
As for longer dated treasuries, if you knew anything aboud how the fed always has worked, you would have known that in order to manage short term interest rates, the Fed has bought and sold treasuries all the time. However, that would meanly have been in maturities less than one year. Therefor anything longer falls within the definition. 10 years is not where short stops and long starts.

Sun, 08/09/2009 - 11:25 | 30867 deadhead
deadhead's picture

30775 said: "My point was against the theory that the Fed works with the Pds to guarantee their buys at the auction. This data clearly does not proof any of that. It doesn't stop many of you of fantasizing about it, but that is a different story.
"

If it has big orange webbed feet, quacks,.....never mind.

Sun, 08/09/2009 - 23:46 | 31316 Anonymous
Anonymous's picture

Exactly my point. That thing with big webbed orange feet, quacking all the time is no elephant, no matter how much Tyler tries.

Sun, 08/09/2009 - 01:54 | 30741 PragmaticIdealist
PragmaticIdealist's picture

"You miss the fact that the Fed can only buy what is offered, that they have to take the cheapest offers and can not just buy anything, that the on the run issues are more liquid and therefore cheaper to buy in most cases. And you even manage to conclude away the fact that if PD would have hold on to the issue they bought on the auction at 99.27, they would incur a loss (and a big one that is) selling them at 99.07. Obviously that would not make sense in any book."

That is the damn point Tyler is making... It's fishy that they are taking such a loss...

"One last, but maybe most important observation that you miss: in the auctions that did not go well, primary dealers got most of it. However, in the auction that did not go well, primary dealers only got a handful of the issue compared to others."

HMM, maybe it's because when the Fed anticipates a poor auction showing they incentivize primary dealers more?!?

Logical thinking is your friend...

 

Sun, 08/09/2009 - 03:34 | 30768 e1even1
e1even1's picture

"It's fishy that they are taking such a loss..."

it would be understandable if the PD's knew that non-fed demand was so weak that they wanted to cut the loss short and Ben's asked for first refusal. that's the way demand is starting to look now. like i said in another post, he almost has to correct equities now to help him with demand.

i don't buy the HFT manipulation theory, but one way he could correct equities would be to raise the margin requirement to, say, two thirds. i think he would would rather risk doing that than become the entire secondary treasury market. what a mess.

Sun, 08/09/2009 - 05:15 | 30777 Anonymous
Anonymous's picture

"That is the damn point Tyler is making... It's fishy that they are taking such a loss..."
Who said they actually took a loss? Again it shows you and others here know nothing about bonds and trading in bonds. That is not a problem, untill you apply your knowledge of something else to explain what happened here. It is like asking a car mechanic to explain an open heart operation.
Pds would have taken a loss if happened what Tyler suggests has happened. The FED takes it all of them. They would have been pretty stupid to say the least. However, in reality they might have sold it the next day already, and bought it back a day later again at a different price. Or they used it to cover a short. Or they hedged it using an interest rate swap, a hedge they reversed on monday. There are plenty of options for bondtraders.

"HMM, maybe it's because when the Fed anticipates a poor auction showing they incentivize primary dealers more?!?

Logical thinking is your friend..."
logical thinking indeed is, but whatever you say above does not fall into that category. The claim by Tyler is that the auction went better because the FED guaranteed the PDs they would offload their treasuries. Clearly the data shows that it was NOT the PDs that made the auction a succes. So unless you make a new claim, something like the Fed worked with China to make the auction a succes, you have no point.

Sun, 08/09/2009 - 06:29 | 30789 Cheeky Bastard
Cheeky Bastard's picture

anon you make some valid points, but also some naive ones when you talk about the FED and their re-purchasing mechanics. first of all you do a lot of speculative thinking, because you know only what you are being told and nothing else. id there ever was a black box, the FED is one .... and the PDs could have done all the things you have said, but consider this my friend; when applying the Occam Razor here, the most logical thing for the FED to do was that it entered an  pre-auction agreement with the PDs about repurchasing the bonds in a open market and then " trough non-conventional and complicated market processes " made the PDs whole and a little bit more ... when applying logic this would be the most logical solution ..

 

oh, and dont make your posts sound so FED apologhetic, its kinda sickening

Sun, 08/09/2009 - 07:31 | 30796 Anonymous
Anonymous's picture

Cheaky, i am not apologizing for anyone. All i am saying is that the way Tyler uses facts to come to a before fact taken conclusion is wrong. By doing that he hurts his own goals, as more and more people will realise large part of what he says is full of air, and therefore will stop taking him seriously. Look at Yves. Lookat myself. A few times i have already commented on things i noticed that are completely wrong or show enormous lack of understanding (the cb fx-swap business for instance) but never ever will you see a post from Tyler saying he was wrong on a certain subject, maybe it works differently, maybe such or so did have a valuable purpose.
I am not denying a lot of things were mishandled before and during the crisis and still are. But come with the right data and analysis, with facts. And don't call everyone who has a different opinion names, a little respect for people making their vast knowledge availlable for free, like John Jansen, is not a lot to ask. Disagree with him if you wish, but come with facts and details and use someone with at least a decent knowledge of the subject to do the analysis.

Signing off.

M

Sun, 08/09/2009 - 11:41 | 30874 Anonymous
Anonymous's picture

John Jansen has a following.

Sun, 08/09/2009 - 20:54 | 31188 MYUSEDR (not verified)
MYUSEDR's picture

Will we see a big correction? The fundamentals say yes, but ppl keep buying anyway. That's why I'm also in the buy & hold camp, I admit.. I've observed too many time where a stock trades lower while on balance volume

 

hat tip to recommended reading 4 slow news day ..http://www....

Sun, 08/09/2009 - 20:57 | 31193 MYUSEDR (not verified)
MYUSEDR's picture

Will we see a big correction? The fundamentals say yes, but ppl keep buying anyway. That's why I'm also in the buy & hold camp, I admit.. I've observed too many time where a stock trades lower while on balance volume

 

hat tip to recommended reading 4 slow news day ..http://www....

Sun, 08/09/2009 - 01:46 | 30711 Pizza Delivery Man
Pizza Delivery Man's picture

It wouldn't have been too hard to write a small synopsis at the bottom saying

"So as to summarize, the Fed is monetizing the debt though not outright during schedualed Treasury auctions. Instead they are using Primary Dealers as a proxy with time premium to allow the stock market to digest news of illusory Treasury auctions (that in fact would have most likely failed). The Federal Reserve is by this process manipulating all asset classes by providing liquidity using the process of monetization (printing money)"

Not sure if that is an accurate summary. I deliver pizza for a living, what do I know?

I'm guessing this is bad because not only does it reflect a growing nauseum of foreign creditors looking at financing our debt but raises the question if  there are even enough dollars in the world to back stop the 14 trillion or so our Gvt/Fed have promissed to backstop. This could have either an extremely deflationary/inflationary reflex but no one really knows because this scenario has never presented it's barechested nipples in all it's grandeur.  

Seriously. There were only two ways to pay for all the bullshit the government has been throwing everwhere (700 billion here, 700 billion there, billion for this, billion for that, TALF, TARP, PPIP, whatever)

A. Borrow

B. Print

Option A didn't work so it should be of no surprise that the second option has been chosen. I am assuming this is why John Paulson/Einhorn and others have been buying gold. Like this shit takes a genius? It seems easily understandable once you filter out all the bs.

 

Sun, 08/09/2009 - 02:41 | 30754 Anonymous
Anonymous's picture

A. is not an option 'cause it only increases the debt.

options really are:
A. increase taxes and reduce borrowing and spending to repay the debt
B. monetize debt and devalue the currency
C. default

Sun, 08/09/2009 - 03:04 | 30757 Anonymous
Anonymous's picture

Seems like the only places not in this same situation are the export nations.

Sun, 08/09/2009 - 06:51 | 30793 Anonymous
Anonymous's picture

there is one more: sell some assets.
like Louisiana goes back to France, Alaska to Russia...
maybe China will be interested in California, if Mexico doesn't claim it...

Sun, 08/09/2009 - 11:49 | 30879 Anonymous
Anonymous's picture

"I deliver pizza for a living, what do I know?"

Do you have a Master's or a Ph.D.?

Sun, 08/09/2009 - 12:53 | 30909 Pizza Delivery Man
Pizza Delivery Man's picture

Ph.D

Pizza house delivery.... biotch.

Sun, 08/09/2009 - 01:57 | 30737 My cognitive di...
Sun, 08/09/2009 - 01:50 | 30739 Bodhi
Bodhi's picture

"Never compromise, not even in the face of armaggedon."

 

Sun, 08/09/2009 - 03:03 | 30756 D.O.D.
D.O.D.'s picture

Hey Tyler, I went over and read what John Jansen had to say, he is the biggest shill EVER, well no Dennis Kneale takes that on, but JJ is a VERY close second.  This guy definately still believes in Santa and the Easter Bunny...Also, he sounds a little bitter that you have more followers... It really sounds like a bunch of old timers fighting to keep the old ways alive over there...

VIVA LA MAYHEM!!!!

Sun, 08/09/2009 - 03:18 | 30760 George the baby...
George the baby crusher's picture

I lay awake at night and see ponzi schemes every where... Am I going mad or is the whole debt driven economy

a ponzi.  NOoooooooo, say it isn't so mummy.....

Sun, 08/09/2009 - 04:50 | 30772 simonsays
simonsays's picture

don't worry sweet child it will all be over soon.

Sun, 08/09/2009 - 04:56 | 30774 Anonymous
Anonymous's picture

Maybe you're right.

See Minsky's Financial Instability Hypothesis

http://en.wikipedia.org/wiki/Hyman_Minsky

Sun, 08/09/2009 - 04:51 | 30773 Anonymous
Anonymous's picture

This IS the top of historical pozi´s,..maybe Hoffa is behind it all. Seriously it will blow up in the face of all ordinary citizens around the world,...wee´ll have that stockmarket crash once the elite and everyone with a connection to it has their ass covered. S&P with a 2´handle?,.. high interstrate,.at least 15 % on th 10y,..and NO INFLATION,..the dollar will be dumped when foreigners like me don´t want your t-bills anymore (and we DON´T) it´s is the worst crap you can hold,and we don´t want our savings in fertalizer..i love the US,..but you are really digging a hole for your self,..prayers to you all!
(Infaltion requires that the money gets circulated,..but it will erode the wealth og the elite,..and they will never allow it,..the´d rather squezze the little guy.)

Sun, 08/09/2009 - 04:59 | 30776 Anonymous
Anonymous's picture

You might also want to read Minsky.

Sun, 08/09/2009 - 05:19 | 30778 Anonymous
Anonymous's picture

Minsky rings af bell,..your point?

Sun, 08/09/2009 - 05:26 | 30780 George the baby...
George the baby crusher's picture

Well OK then, I accept the fact that it's all one big ponzi, right? But ponzis don't bust like bubbles do they?  Do they!? Oh god NOooooooo don't say ponzis can bust.....mummy...... 

Sun, 08/09/2009 - 05:37 | 30782 Anonymous
Anonymous's picture

Well like I said, i´am not a US citizen,..have to say though,..even in the face of harsh realities,..you don´t loose your sense of humor,..amirable!

Sun, 08/09/2009 - 05:38 | 30783 Anonymous
Anonymous's picture

Please excuse the poor spelling!

Sun, 08/09/2009 - 06:46 | 30792 George the baby...
George the baby crusher's picture

The truth of the matter is, this wonderful decade we have just consumed also created huge over capacity.  This affects all nations on this globular globalised lala planet. Two thirds of the worlds assest are valued in USD. Peak oil. etc.  So, and now  comes the point of this rant... Even if you're not a US citizen, it's best you get a sense of humor.

Mon, 08/17/2009 - 07:23 | 38554 Chumly
Chumly's picture

You nailed it - most of it.

This should be the central discussion of macroeconomics right now - the huge overcapacity in global system.  Now, add to that overcapacity, exponential growth of dept that financed the bubble and the debt that will finance that debt and, well, we have a problem.  A big problem.  Hence the CBs are resorting to desparated measures "whatever is necessary," as they say.

Sun, 08/09/2009 - 06:54 | 30794 bobby02
bobby02's picture

“allocations to primary dealers in 2009 Bond auctions is an undisputed majority (55%)” Shocking! When was the last time that happened? How about “always” – it is a function of primary dealers to insure that the auction go off without a hitch. They then distribute the paper to end users. This was more so that case when the placement schedule was lighter. (Changes in direct vs. indirect does complicate matters, but probably only at the margin.)

 What is sold to the Fed is a direct function of primary dealers’ inventory. If you go back and look at POMO operations before QE, before the crisis (tell Martenson that it’s probably a good idea to do some research before J’accuse), you will see that the Fed offered to buy a laundry list of securities, but almost always wound up buying a handful of issues, sometimes only 2 or 3. Why? These are the papers the dealers have in large supply and are cheaper relative to off the run stuff.

 Even in the August 6 POMO that is the heart of your conspiracy, the Fed offered to buy 16 different notes. $4.75b or 68% was the on the run, but another $2.13b (30%) was not. Look at other operations. You will see the same pattern. If anything, it seems like the Fed is buying more different issues, probably because of the size: The Fed now buys $7b at a clip compared to an average of something like $1b in 2007. (It would be interesting to see the average time from placement to POMO pre-BSC death, but I don’t have a Bloomberg in front of me.)

 (As an aside, did of any of you guys work on the sell side? Those huge tables! The graphs with the different sized balls complete with shading and contours – fantastic! If only those graphs were in 3D to reflect the phase of the moon during the placement. Still, I’m ready to buy whatever you are selling!)

 Don’t get me wrong, I think what the Fed and the government are doing is terrible and will end badly. They are monetizing the debt, pure and simple, despite what the chairman says, and that is a recipe for disaster. (Greenspan specifically should be put on trial for crimes against humanity for the multi-generational pain he has caused. Paulson could use a visit to the confessional.) But there are no black helicopters this time – Bernanke is dropping money in the light of day.

 This a fantastic site, with many, many truly stunning pieces. This, however, is not one of them.

Sun, 08/09/2009 - 12:32 | 30899 Anonymous
Anonymous's picture

Exactly. This piece is not exactly news:

http://www.zerohedge.com/sites/default/files/images/Fed%20Balance%20Shee...

It pretty obvious that the FRB has been increasing its securities held outright while Maiden Lane and other assets have been declining and net borrowings have been relatively static since March. Yet perform a time series analysis and produce some pretty bubble charts, the next thing you know everyone in this echo chamber has got their panties in a bunch. The groupies here may be good at captcha math, but they obviously have a hard time thinking for themselves.

Sun, 08/09/2009 - 07:02 | 30795 Anonymous
Anonymous's picture

To "george the baby"
Dohn´t get me wrong, I agree with your comments,I see the global impact og all this,.. and understand the implications of the dollar,..I see it comming down hard on everyone,no European index has a good day without a rally on wallstreet..which is why I´ve lost my sense of humor!

Sun, 08/09/2009 - 08:00 | 30798 Anonymous
Anonymous's picture

just testing my captha skills

Sun, 08/09/2009 - 08:53 | 30810 Raymond Shaw
Raymond Shaw's picture

Bravo el capitan !  Belissimo ! (coupled with italian hand gestures)

Sun, 08/09/2009 - 09:17 | 30817 LuisvonAhn
LuisvonAhn's picture

I would like to know how the fed paying interest on reserves has had any impact on dealers reselling issues? Just a thought.

Sun, 08/09/2009 - 09:36 | 30826 assumptionblindness
assumptionblindness's picture

The auctions this week should prove to be VERY INTERESTING.  When the lights are turned on the cockroaches always run.  You can bet your ass that Ben has been on the phone all weekend long to obtain 100% support for the offerings this week... 

Sun, 08/09/2009 - 10:29 | 30841 Anonymous
Anonymous's picture

If one cuts away the hyperbole in this article (a point Yves Smith makes appropriately on most of ZH's pieces), you seem to have proved just the opposite of the point you were trying to make: That the POMO is engaged in QE by selling Treasuries at a loss within days of their initial offering, thereby expanding money supply.

What I see, when the smoke has cleared, is that out of $1.1T of Treasury bonds sold this year, about three percent (3%) or $32 billion meet this criterion. Using your example of a 19 BP loss, this "strategy" would have increased US money supply by only about $600 million through the entire year.

Moreover, you provide no context. Is this year any different than any year? Try comparing this year's result with the last decade. I would expect we would have seen much more QE in the Greenspan era than we're seeing now.

Sorry, but no sale here.

Sun, 08/09/2009 - 10:40 | 30848 Cheeky Bastard
Cheeky Bastard's picture

Zero Hedge is not making any claims, but merely asking questions. And while we appreciate the opinions of self-professed experts such as John Jansen, these answers should really come from the proper authorities - the US Treasury and the Federal Reserve of the US.

Sun, 08/09/2009 - 11:49 | 30880 deadhead
deadhead's picture

thank you for restating TD's objective, cheeky.  as i read through the thread, i noticed several critical comments about ZH making claims, etcetera.  The words of the author stating that he is not making claims but asking questions must have been missed by those who either did not read the entire article (amazes me how many people don't read an entire piece) or had preconceived notions that are inflexible.

Mon, 08/10/2009 - 13:18 | 31607 Anonymous
Anonymous's picture

Typical internet nonsense -- ignorance hiding behind questions. This has become as ubiquitous as Clinton and Bernanke's hiding behind vocabulary.

"...while a normal distribution would not show a significant preference to a lumped clustering..."

This statement is not a question, but comes with the unspoken presumption that purchases should not be lumped or have preference. Where is the rule that there should not be a preference, or the preference should be normalized? When you invalidate this premise as an unsubstantiated a priori (that one should expect normal distribution) the whole chart becomes a pointless image of bubbles.

Ya, sure, no claims, just questions. Too bad you people don't know how to ask good questions in the first place. You might have figure out proving monatization can be done with one link to the Feds FAQ on QE and a few links to dictionary terms. If you want to get fancy, simple addition and subtraction formulas will do it.

Instead, all this nonsense and innuendo simply discredits zero hedge as a trustworthy source of information.

BTW: Innuendo is a question with a hidden motive. From your resorting to foul language it's obvious your minds are too shallow or inundated with confusion to see reality for what it is.

No, I'm not an insider. I think the fed sucks, and the whole banking system. But this dung only does a disservice to credible people trying to do something constructive about it.

Mon, 08/10/2009 - 14:44 | 31765 Anonymous
Anonymous's picture

I assume you have the data to support your point of view and the additional proof to support you dealer activity rationale.

Sun, 08/09/2009 - 12:41 | 30905 Anonymous
Anonymous's picture

Get off your knees cheeky and grow a brain. You've become infatuated with a pixel of Brad Pitt. This ain't news:

http://www.zerohedge.com/sites/default/files/images/Fed%20Balance%20Shee...

Sun, 08/09/2009 - 17:41 | 31037 Cheeky Bastard
Cheeky Bastard's picture

fuck you man; it ain't supposed to be news, but an analytical piece ... Jesus fucking Christ 99% people here has a college degree, but only about 5% can read with comprehension. Try not to suppose things; the disclaimer was written and that is a fact; your little rant is BS and nothing else: Yes everyone knew that the FED is monetizing debt, but no one has proven it: TD did it in this great piece of analytical writing. Do fuck off with your ad hominem arguments; oh and one last point; it is not the fact that the FED is monetizing debt but the rate they are doing it and the fact that they use PDs to insure that the auction does not fails. it is one thing to re-purchase treasury bonds when the auction goes without interference, and a whole another thing when you use TDs to make sure that the auction doesn't fail ..

Sun, 08/09/2009 - 17:25 | 31035 mcnetgb
mcnetgb's picture

Is this site called Zero Hedge because TD has zero understanding of hedging?

The price of the securities in question moved by 19bp over the period in question. That does not mean that the PDs lost 19bp over that period.

There's somethng called a futures market, and in the simplest strategy the PDs were long the bond and short the futures, which also moved during the holding period.

This is a rookie mistake. Retract it before you lose any more credibility.

Sun, 08/09/2009 - 19:59 | 31150 deadhead
deadhead's picture

1. I restate Duck theory.

2. I think most of us here, including TD, understand hedging and are aware that there is something called a futures market.

3. as difficult as it is to prove the FED and PD postulated "arrangement",  it is equally difficult to prove that the PD in question was hedging. Unless, of course, you are the trader in question for that particular transaction.

Sun, 08/09/2009 - 20:20 | 31164 Anonymous
Anonymous's picture

Statment 3 is hilarious.

Sun, 08/09/2009 - 10:44 | 30849 Anonymous
Anonymous's picture

Well my only thoughts were dollar is going to drop like crazy in the next half year and gold is the way to go:

http://www.wealthalchemist.com/Blog/2009/08/gold/

Sun, 08/09/2009 - 11:04 | 30856 Anonymous
Sun, 08/09/2009 - 11:42 | 30876 Anonymous
Anonymous's picture

Is it OK to watch Michele Caruso Cabrera's tits with the sound off?

Sun, 08/09/2009 - 12:00 | 30886 Anonymous
Anonymous's picture

It's fine, put on some Carmen Miranda, and enjoy.

Sun, 08/09/2009 - 11:55 | 30884 Stuart
Stuart's picture

Those that came from within the system defend the system.  Those that were not ask intelligent questions and critique motives.   

Sun, 08/09/2009 - 17:43 | 31042 Anonymous
Anonymous's picture

bingo!

Sun, 08/09/2009 - 12:41 | 30906 Anonymous
Anonymous's picture

Two points:
The personal attacks on Yves exposed you as the blogger version of Gasparino. You're apparently too thin skinned for this business, very surprising

Second
The dealers obviously hedged their positions on auction date (duh). They didn't incur the losses you suggest. Just making the statement exposes your ignorance. That suggests hyperventilating is a valid observation.

Suck it up and move on to the substance please.

Sun, 08/09/2009 - 12:50 | 30908 Anonymous
Anonymous's picture

come morning, I will be sober, and you, will remain an ass

Sun, 08/09/2009 - 13:50 | 30939 Anonymous
Anonymous's picture

Worker bees can leave. Even drones can fly away. The Queen is their slave.

Sun, 08/09/2009 - 14:19 | 30948 Project Mayhem
Project Mayhem's picture

Well done sir.  Let me know if you need any code.

 

Sun, 08/09/2009 - 14:37 | 30959 Anonymous
Anonymous's picture

One critical point which is being lost is that yield curve is quite steep. So there is a good spread between the 7yr (3.369) vs the 5yr (2.689). You are getting 68bp for a going forward 2 years. Assuming the economy stops collapsing and short term rates start rising, this spread is likely to decrease.

So there was a natural reason for more buyers to be interested in the 7yr than the 5yr auction. The poor 2yr results right before the 5yr also suggested that the appetite for short term securities is perhaps decreasing as the market looks beyond the depression like scenario to potential growth.

OTOH, I have absolutely no doubt that there is coordination between the Fed/Treasury/Dealers. And I see no reason why there should not be. Extraordinary times demand extraordinary measures.

Sun, 08/09/2009 - 15:08 | 30981 Anonymous
Anonymous's picture

no wonder Tom Lindmark is another clown looking for a job

http://www.butthenwhat.com/?p=5746

Sun, 08/09/2009 - 15:06 | 30978 Anonymous
Anonymous's picture

So do your little basispoint arbitrage,..we (the foreigners who you depend on buying t-bills),...still think its bad business to lend you more money given the level of debt you are reaching,...makes us suspicious that you won´t have the will/ability to pay it back in the future except with more printet money,...we need higher int.rate to compensate the risk!,...so we prefer to lend to our own shitty govt. the money rather then a foreign govt. (the u.s),...at least that way the money is spent close to home and by politicians we have voting rights over. And make no mistake you won´t hear this fra our official medias/govt. but foreigners are not blind "buying sheep",..Yes its not in our own selfinterst to scaremonger and have our t-bill holdings evaporate to worthlessness with a panic sell-off,...so for now we will play this silly game of "they know that we know that they know that we know",..... the crowding out is already in effect,... and the only real demand for t-bills is from the u.s govt,...with printet money,...and the world knows it!

Sun, 08/09/2009 - 15:18 | 30987 Anonymous
Anonymous's picture

after Geithner said to those stupid asians that they need to redirect their efforts and their products to their own people and forget about the US consumers for a very long time, what can asians reply?

I bet Geithner's rants were translated as "Fuck you!"

Mon, 08/10/2009 - 05:10 | 31383 Anonymous
Anonymous's picture

Nobody thinks you're sheep.

Sun, 08/09/2009 - 16:06 | 31008 Anonymous
Anonymous's picture

The Future looks short, but you can't short the future.

Sun, 08/09/2009 - 16:28 | 31017 jg
jg's picture

Outstanding work, sir!  Man, you guys put some time in on this, and it shows.

Looks compelling to me.

Sun, 08/09/2009 - 17:08 | 31029 EB
EB's picture

Greatly anticipating the release of the data.  Able to notice some interesting things just from the jpg of the spreadsheet.  Also, a small correction to the dates--the auction for 8/7/09 s.b. 8/6/09.

-EB

Sun, 08/09/2009 - 18:58 | 31104 mortgageloser (not verified)
mortgageloser's picture

I lay awake at night and see ponzi schemes every where... Am I going mad or is the whole debt driven economy

i concur... good artixle 4 slow news day: http://st2rturl.com/cgerermr ?

Sun, 08/09/2009 - 19:48 | 31116 a kühnlenz
a kühnlenz's picture

The Fed bought treasuries for 170 bn $ in the second quarter. In the same time the amount of outstanding marketable treasuries (bills included) rose by 250 bn $. These are the important numbers, I guess. The Fed already absorbed more than a half of new treasuries in spring and will do so in summer. Is it really so important to count the days after an auction the fed needed and still needs to buy the treasuries back? More interesting for the future (when the Fed will stop buying treasuries after September) is the fact how indirect bids (which include foreign reserve banks) rose after the poor auction of the 5 yr notes.

Sun, 08/09/2009 - 21:30 | 31233 accountv (not verified)
accountv's picture

His message was being spread and gaining even more support...therefore he needed to be censored.

Until we have guys like Black back as regulators nothing will change. We just can not compete with the vast amounts of money being used to influence decisions. The Rich article says"

recommended one of my favorit new finance sites..

Sun, 08/09/2009 - 21:39 | 31241 mylotr (not verified)
mylotr's picture

Seriously. There were only two ways to pay for all the bullshit the government has been throwing everwhere (700 billion here, 700 billion there, billion for this, billion for that, TALF, TARP, PPIP, whatever)

Mon, 08/10/2009 - 02:52 | 31379 Gordon_Gekko
Gordon_Gekko's picture

"there is absolutely nothing unique or special about today’s transaction by the Open Market Desk."

Which only means that the Fed has been stealthily monetizing loads of toilet...er...Treasury paper longer than most people think. F--king brilliant Mr. John Jansen. Another thing - NYFed is a s--thole.

Mon, 08/10/2009 - 06:30 | 31393 pros
pros's picture

http://www.idp.zhaw.ch/en/school-of-engineering/idp-institute-of-data-an...

worth a look from some sober swiss financial engineers

<!-- /* Font Definitions */ @font-face {font-family:"Cambria Math"; panose-1:2 4 5 3 5 4 6 3 2 4; mso-font-charset:1; mso-generic-font-family:roman; mso-font-format:other; mso-font-pitch:variable; mso-font-signature:0 0 0 0 0 0;} @font-face {font-family:Calibri; panose-1:2 15 5 2 2 2 4 3 2 4; mso-font-charset:0; mso-generic-font-family:swiss; mso-font-pitch:variable; mso-font-signature:-1610611985 1073750139 0 0 159 0;} @font-face {font-family:Consolas; panose-1:2 11 6 9 2 2 4 3 2 4; mso-font-charset:0; mso-generic-font-family:modern; mso-font-pitch:fixed; mso-font-signature:-1610611985 1073750091 0 0 159 0;} /* Style Definitions */ p.MsoNormal, li.MsoNormal, div.MsoNormal {mso-style-unhide:no; mso-style-qformat:yes; mso-style-parent:""; margin:0in; margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:Calibri; mso-fareast-theme-font:minor-latin; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin; mso-bidi-font-family:"Times New Roman"; mso-bidi-theme-font:minor-bidi;} p.MsoPlainText, li.MsoPlainText, div.MsoPlainText {mso-style-noshow:yes; mso-style-priority:99; mso-style-link:"Plain Text Char"; margin:0in; margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:10.5pt; font-family:Consolas; mso-fareast-font-family:Calibri; mso-fareast-theme-font:minor-latin; mso-bidi-font-family:"Times New Roman"; mso-bidi-theme-font:minor-bidi;} span.PlainTextChar {mso-style-name:"Plain Text Char"; mso-style-noshow:yes; mso-style-priority:99; mso-style-unhide:no; mso-style-locked:yes; mso-style-link:"Plain Text"; mso-ansi-font-size:10.5pt; mso-bidi-font-size:10.5pt; font-family:Consolas; mso-ascii-font-family:Consolas; mso-hansi-font-family:Consolas;} .MsoChpDefault {mso-style-type:export-only; mso-default-props:yes; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:Calibri; mso-fareast-theme-font:minor-latin; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin; mso-bidi-font-family:"Times New Roman"; mso-bidi-theme-font:minor-bidi;} @page Section1 {size:8.5in 11.0in; margin:1.0in 1.0in 1.0in 1.0in; mso-header-margin:.5in; mso-footer-margin:.5in; mso-paper-source:0;} div.Section1 {page:Section1;} -->

Mon, 08/10/2009 - 12:54 | 31566 Anonymous
Anonymous's picture

What a load of dung. This is so full of nonsense it's ridiculous. Check out False dilemma, Proof by example, Fallacy of many questions, Fallacy of the single cause, Incomplete comparison, Post hoc ergo propter hoc, Proof by verbosity, Hasty generalization, Misleading vividness, and maybe others:
http://en.wikipedia.org/wiki/List_of_fallacies

Exactly how much should PRIMARY dealers be buying at auction? They're primary dealers, for crying out loud.

Let's see your graphs from the years 2000 through 2008. Pray tell, how many days after auction is SOMA supposed to make their permanent purchase? Where the heck do you get off presuming it must be a normalized curve? These SOMA purchases aren't normal in the first place, and you have no precedent to define normal expectations.

And what the heck is all that dung about China? Where is your 10-year chart on the Chinese purchase of US treasuries? Where is your data that demonstrates for a fact China normally buys a certain quantity of new issue treasuries? Or data that demonstrates there is a reason why China would want (or not want) new issues as opposed to old issues?

And the most obvious question of all, how do you know the 5 year didn't fail followed by a successful 7 year precisely because those with more information than you knew the fed was going to need to buy further out on the yield curve to balance their portfolio, held off on the 5 year auction and attacked the 7 year with a vengeance, like professional equity traders make calculated and successful bets about directional movement of the stock market.

Or the equally likely scenario, that primary dealers were using spreads, futures, or options to hedge these purchases and have offsetting positions that we'll never get data for that explain perfectly why the purchase what they are purchasing.

Mon, 08/10/2009 - 14:33 | 31748 Anonymous
Anonymous's picture

I assume that you have the data to support your argument.

Mon, 08/17/2009 - 07:07 | 38548 Chumly
Chumly's picture

We can only imagine what kind of backdoor wheelin' and dealin' that is possibly taking place via the overseas route.  If the PDs have such a cozy relationship, then what is the relationship the FED has with other participants it needs.

We need to remember that we are the Banana Republic Americana.  Nothing should surprise us - really.  Of course, ZB is monetizing the debt.

 

Sat, 05/14/2011 - 09:48 | 1274096 isolinx
isolinx's picture

I visited this page first time and found it Very Good Job of acknowledgment and a marvelous source of info.........Thanks Admin!

http://www.reverse-phone-look-up.net
http://www.reverse-phone-look-up.net/phone-lookup

Do NOT follow this link or you will be banned from the site!