Risk-Free Money From The Fed: Frontrunning Today's POMO

Since the New York Fed's 20-some year olds who are in charge of the Open Market Operation desk have made it clear it is everyone's patriotic duty to frontrun the Fed, courtesy of their "complex" algorithms, below we present the full frontrunning cheat sheet for today's last for the current schedule $7-9 billion POMO focusing on bond due 2016-2017. Those who wish to take no risk whatsoever should merely buy the 10 Cheapest bonds as predicted by Morgan Stanley's treasury spline. Note that the November CUSIP is now cheapest to deliver and should therefore be on the Exclusions list. Also, not surprisingly the December 7 year auction is sufficiently underwater on a relative cheapness to sector basis, that if any PDs actually offer it for sale, then we know for a fact that the spreads on the bid/ask offered by the Fed are so large they more than offset capital losses on actual exit trades and should be sufficient for Ron Paul to demand a congressional inquiry into just how much the Fed pays the PDs in commission spreads in each and every POMO.

Those wishing to make a virtually risk free profit should buy the bonds in the top 10 box to the right, and sell shortly after the end of POMO. And don't forget to thank Mr. Frost's algorithm.

Comments

[Joe Davola]

I've got a sawbuck that's not doing anything, can I get a piece of the action?

[hedgeless_horseman]

Project Mayhem Lite at the ready, Sir.

http://www.webslingerz.com/jhoffman/congress-email.html

1-11-11

Dear Congressman___________________:

The December 7 Treasury issuance, auctioned today, was sufficiently underwater on a relative cheapness to sector basis, that because PDs actually offered it for sale, we know for a fact that the spreads on the bid/ask offered by the Fed are so large they more than offset capital losses on actual exit trades.   Please demand a congressional inquiry into just how much the Fed pays the Primary Dealers (whom own the Fed--a clear conflict of interest) in commission spreads in each and every POMO.

Regards,

Your name here

[More_sellers_th...]

When will this fraud end???Take a random selection of 30 stocks and put em on your screen.  Every one ticks red or green at the same time.  Its all program algorithmic shit! There is not one real buyer or seller left!!!! The last sale of an equity is absolutley meaningless! Who the hell would put any money into a ponzi like that?? Good luck with your 401k boys... this market structure is on full retard , because not one moron at the government level had the balls to say no to the Goldman boys, probably because they couldn't understand what they were talking about and didnt want to admit it.

[slow_roast]

+1

[buzzsaw99]

that explains it.

[unwashedmass]

what i loved most about that article was how smug they seemed, declaring it all a great success.....

figures, they don't grasp that markets are markets, and ....the second they stop with their free money giveaway, we're taking rubble....

they assume its all going to stay up. right.

detonation, devastation and rubble.

[Elk peanus]

what time does POMO end?

[Lord Blankcheck]

11am EST

[unwashedmass]

let us all look at another case of utterly amazing levitation of a stock with NO buying interest.....CAR. astonishing climb on less than nothing but ....well, can stocks rise in a vacuum? does a tree make a noise in an empty forest?

[Cinfultreat]

delete

[plocequ1]

I can see those two POMO dudes on the phone now... "POMO dude hotline, May i take your order?"

[gloomboomdoom]

Things are looking pretty good over here....and it certainlyy appears everything is going to be just fine....actually many experts are? saying the dollar will be one of the strongest currencies around within a year....what doomsday event will you people move onto next ?

[hedgeless_horseman]

I have always wanted to visit Myanmar.  How is the weather today?

[thepigman]

What a country. Ain't it great that

a handful of twenty-somethings are

responsible for the rise in US interest rates?

You can't get that kind of experience

outside the Fed.

[virgilcaine]

Intraday reversal on a Pomo day?   When everything is full priced for perfection, the Mkt will usually do the opposite and give you the unexpected.   The demise of the Euro would be my best guess.  We are at the Euphoric state, basking in it's glow .. when suddenly.

All was well that day, Charts were looking good, the Frb boyz were at their Dell 2002 class  optiplex pc's, Ben was giving a speech somewhere.

http://www.stevens.edu/itwiki/w/index.php/Class_2002_Dell_OptiPlex_GX1_Desktop

[omi]

Now don't say that Bernanke is not a genius!

Problem: a)too much money(credit rather) has been destroyed b)banks are insolvent

Action: Setup a franchise of BUY at the top, SELL at the bottom for some financial instruments, some FED account takes a loss on that trade, FED then 'writes a cheque' to that account, repeat.

Result: Banks get to patch their balance sheets, there's more credit (no judgement of whether that's good or bad is implied here)

[virgilcaine]

Time to put this mkt away.  Selling large 1000 SPY contracts .  Goodnite FRB.!