The Primary Dealer - New York Fed Ponzi Circle Jerk Continues
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 bid...at far higher interest rates.
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