The Primary Dealer - New York Fed Ponzi Circle Jerk Continues

Tyler Durden's picture

Exactly one week ago, we commented on what many said was a "strong" 3 Year auction primarily courtesy of a 57.4% primary dealer takedown. We also said: "Keep an eye on CUSIP QC7: it will be the most monetized 3 year paper by the Fed over the next 2 weeks." Today was the first POMO operation since last week's auction focusing on 3 year paper. We present the results of the $6.678 billion POMO below. They, and the 28% flip of the entire PD take down, speak for themselves. Bottom line - not so covert monetization continues in broad daylight, with Primary Dealers naturally getting their (just the) tip value for allowing the ponzi to continue, as everyone else praises the low interest rates on Treasurys, and says just how easy it will be for the Treasury to find Treasury buyers once Qe2 is over. One thing is certain: had PDs known they would have to hold on to these bonds instead of just collecting a hefty fee for flipping them back to the Fed, they would still have submitted far higher interest rates.

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Muir's picture


"New York Fed Ponzi Circle Jerk Continues"


pure poetry


"Primary Dealers naturally getting their tip value for allowing the ponzi to continue..."


Just as I suspected, Tyler majored in Lit.



Ahmeexnal's picture

US Supreme Court building has been evacuated.

sabra1's picture

Alan Greenspan let one go!

defn8Dog's picture

A "suspicious package" turned out to be an abandoned baby carriage.  No sign of Mr. Bean.

buzzsaw99's picture

You either feed the beast or the beast gets angry.

uno's picture

new reality show:  15 minutes with the Bernake   - takes on the beast as well as Snooki

Ancona's picture

It mystifies me that foreign nations just whistle and look the other way, as the U.S. continues to destroy her currency.

When the music stops on this one, the pain will be epic and it will circle the world.

NotApplicable's picture

That's because they are far more addicted to the dollar (and its accompanying global currency inflation) than they'd like to admit.

They all want to consume the future today, up until the instant that there isn't one left.

Spitzer's picture

Would you include Canada ?

Royal Bank of Canada is a Fed primary dealer.

Bank of Novascotia is an official bullion bank(jpm)

And all of them are "authorized participants of the GLD ETF.

MarketTruth's picture

A slight correction if i may:

You mean GLD ETF bankster theft. Check out their 10k filing and you will quickly see that GLD is just another scheme to fleece the stupid from buying real gold. When the music stops, GLD paper owners will be left holding an empty bag.

As the popular (for a reason) saying goes, "If you don't physically hold it you do not own it."

Cleanclog's picture

Will Santelli revise the "A" grade he gave the 3 year last week?  I used to be a PD trader, and there always were bits of collusion and talk among PDs on the street and the big institutional funds, but we didn't have the Fed buying things back as soon as settlement week.  Crazy conditions these days.  

Muir's picture

"I used to be a PD trader, and there always were bits of collusion and talk among PDs on the street"

You bad, GIRL!








Cleanclog's picture

I repent and atone to this day.

hedgeless_horseman's picture

February, 25, 2010

Rep. Brad Sherman, California Democrat, asked Mr. Bernanke directly whether the Fed would consider such a strategy, especially since IMF officials endorsed it.

“We’re not going to monetize the debt,” Mr. Bernanke declared flatly, stressing that Congress needs to start making plans to bring down the deficit to avoid such a dangerous dilemma for the Fed.

TruthInSunshine's picture

The Bernank's virtuous circle.

MarketTruth's picture

They call him Ben Shalom BUKKAKI for a reason.

RobotTrader's picture

I might have made an error in calling for another intermediate low in stocks this week.

Seems like another "flight to quality" occurring as the 35-year bull market in bonds continues unabated.

A clear sign from market participants that:

- Unlimited deficits

- Unrestrained spending

- Fractional Reserve Lending

- Lack of specie-backed currency

- Continued "Wash, Rinse, Repeat" cycles

- Voracious demand for AAA-rated, gilt-edged Treasuries

Will continue indefinitely, with no restraint whatsoever.


firstdivision's picture

Well that magical rally in the 10y yesterday was not demand, but more of an orchestrated measure, IMO.  Unless we see PIM(p)CO is only long 10Y, I do not think yesterday's bounce was true demand. 

You have to admit that bond's and stocks making an upward trajectory at that same time is a bit fishy.  Especially since that goes against historical correlations.

SheepDog-One's picture

And silver and gold on cue shoot straight up, once again canceling it all out, new Treasury bond boot licker Robo!

BTW where is Ol Catfishmouth? Shes far better than this b-cup heroin addict lookin thing you replaced her with. 

Anyway Robo, dream on. PM bonds rule, not phony FED paper.

Zero Govt's picture

you calling a trend Robot on a chart lasting 1 week???

you did this a couple of days ago on Treasuries and i looked at an annual chart and it showed a whole different picture to your naval gazing

plocequ1's picture

 Give me a break. What the fuck did you expect?

Soul Train's picture

right on again. Good insight. This whole system together with foreign wars is bound to implode like any bubble.


Humpty Dumpty.

Then we'll get to draft a new constitution. No more IRS and no more Federal Reserve.

And then let's give the opportunity to segment North America into separate countries. California can be their own. So can NY, MA, NH, and the rest of their brothers.


I am tired of feeding the trough of the banksters and the Washington beltway robber barons.


I have had enough of foreign wars, with no end in sight. And I don't even understand why we are there. And the politicians have no metrics that they report to the USA people - uh, sheople.


A country that loses its morality is soon to collapse. At to it bankruptcy, and it's no wonder gold and silver have started their ascent.


People, you ain't seen nothin' yet.


youngman's picture

And then let's give the opportunity to segment North America into separate countries. California can be their own. So can NY, MA, NH, and the rest of their brothers.



I think this is in our future....after a little bit of chaos......actually quite a bit....

buzzsaw99's picture

North Dakota down through Texas would be more than happy to go it alone.

Lednbrass's picture


Loosely put, I think it will split into Billy Yank, Johnny Reb. the Marlboro Man, and Suzy Moonbeam.

tallen's picture

Gold just hit $1500!!!! Precious Metals DISCO TIME

SheepDog-One's picture

And the walls close in even further in Robos dingy 400 sq apartment.

MisterAmbassador's picture

What really hacks me off is that all of this is being labeled Capitalism and being blamed for the world's problems.

Bailouts are Socialism.  There should never, ever, ever be any bailouts - not even the inefficient, poorly run airlines after 9/11.

The Fed is central planning.  We know that these things don't work, yet we use them and people see that as Capitalism!

Subsidies for corporations and farms are Socialism!

Freddie Mac, Fannie Mae socialized the mortgage markets.

TBTF is Socialism.  Nothing should ever be TBTF.  Capitalism without competition and no risk of failure isn't Capitalism!

I heard Beck saying that some whacko Christian preacher or something has predicted the Rapture for May 21 of this years, so maybe some people won't have to be around to watch it all fall apart, as the hand of the Divine takes them away from this awful place.  Pssh.  I have no desire to go to Heaven is Kirk Cameron was right, after all.  He's annoying.  He had a friend named Boner -  sounds kinda guy.  Did that not mean the same thing in the 1980s?  I mean, I know it can mean mistake.  But, still.

Heard some clip of Neal Boortz after Obama's speech last week.  Hadn't heard Boortz in a while.  Anyway, he refers to Obama as "THAT HACK IN THE WHITE HOUSE" - I almost died laughing.

Drugs will relieve me of what lies ahead before the bottom falls out or deliberately when the bottom falls out.  I'm more of a reincarnation guy, anyway.  If Beck's right, though, we'll I'd rather laugh with sinners than cry with the saints, anyway.


*sniff*  *sniff*  Yeah, I know it's a Tuesday.  Lay off.


This is the perfect philosophy for life:

lineskis's picture

QE3 or not QE3, that is the question...

SheepDog-One's picture

I say 'GO for it'! Personally Id love nothing more than a $5 trillion debt ceiling raise frosted with $2 trillion QE3 icing on gold which will quickly shoot up $200 easily!

Atomizer's picture

indeed..the circle jerk continues.

cabernet's picture

Yea, this is a very easy way for the FED to give tax payer money to the primary dealers. Primary dealers buy from the US Treasury. They mark it up and sell it to the FED. Very easy money. It also creates the illusion that there is decent demand for new issues. Bid to Cover in the 3.5 times range creates the appearance that investors want the notes.


dizzyfingers's picture
Barack Obama (D) Top Contributors

This table lists the top donors to this candidate in the 2008 election cycle. The organizations themselves did not donate , rather the money came from the organization's PAC, its individual members or employees or owners, and those individuals' immediate families. Organization totals include subsidiaries and affiliates.

Because of contribution limits, organizations that bundle together many individual contributions are often among the top donors to presidential candidates. These contributions can come from the organization's members or employees (and their families). The organization may support one candidate, or hedge its bets by supporting multiple candidates. Groups with national networks of donors - like EMILY's List and Club for Growth - make for particularly big bundlers.

University of California $1,591,395 Goldman Sachs $994,795 Harvard University $854,747 Microsoft Corp $833,617 Google Inc $803,436 Citigroup Inc $701,290 JPMorgan Chase & Co $695,132 Time Warner $590,084 Sidley Austin LLP $588,598 Stanford University $586,557 National Amusements Inc $551,683 UBS AG $543,219 Wilmerhale Llp $542,618 Skadden, Arps et al $530,839 IBM Corp $528,822 Columbia University $528,302 Morgan Stanley $514,881 General Electric $499,130 US Government $494,820 Latham & Watkins $493,835 Percent of Contributions Coded Coded $284,930,288 (73%) Uncoded $103,353,467 (27%)   Total $388,283,755  

Why (and How) We Use Donors' Employer/Occupation Information


NOTE: All the numbers on this page are for the 2008 election cycle and based on Federal Election Commission data released electronically on Monday, July 13, 2009.
("Help! The numbers don't add up...")

Feel free to distribute or cite this material, but please credit the Center for Responsive Politics. For permission to reprint for commercial uses, such as textbooks, contact the Center.

gwar5's picture

Circle Jerk is exactly right. We're all getting sploogied. This isn't capitalism. This is an orgy of criminality and crony billionaire socialism masquarading as humanitarian market intervention. 

Zero Govt's picture

good summation that  :)

Carnegie_IB's picture

do i understand this correctly?

The fed issues debt, has fake buyers [the PD] in the crowd to make the auction look active. After the auction ends, the PD [Ponzi Debt] buyer sells the bond back to the Fed Bank at a higher price?

Wash, rinse and repeat? trying to develop credibility.


does the Fed issue debt, use the PD as a conduit, they get their fee, the fed buys it back using newly issued credit, and the PD profit is like a transaction fee?

at least cut out the PD and save a bit in fees, no can do, that would reduce credibility and cannot entice valid buyers to participate.

Zero Govt's picture

"New York Fed Ponzi Circle Jerk Continues"

I'm not even going to try and picture that.. get as far as fat old farts, cronies sitting around a board table and they stand to unbelt their pants and ....stop!!!