Today's Edition Of The FRBNY's "Flip That Bond" Criminal Reality Show Is Now In The Books, As Primary Dealers Continue To Churn Just Issued Bonds

Tyler Durden's picture

The Fed's blatant "Flip That Bond" criminal reality show, funded entirely by you, dear taxpayer, continues, and is in fact accelerating. Over the weekend we provided a list of the 10 cheapest bonds that the Fed should monetize based on their relative position on the spline, in terms of cheapness/richness (link) and implied that should the Fed veer away from this list, it would be engaging in what is certainly non-fiduciary activity, by merely facilitating taxpayer rape on behalf of the Primary Dealers who "put" to Sack Frost whatever issue they want, and certainly not the cheapest ones to be monetized by the US taxpayers (i.e., an act that would at least pretend to save some money). Specifically, we said: "The just auctioned off 2.75% of 12/31/2017  is not even among the top 10 cheapest bonds, which means that if on Monday the PN4 makes up for a material percentage of the $7-9 billion buyback, then something is very, very wrong." Well, one look at the final completion list of Today's POMO indicates that it is precisely the just auctioned off PN4 due 12/31/2017 that made up over half of the entire bloody operation! At 4.551 billion (out of a total $8.869 billion in bonds monetized), the Fed actively conspired with PDs to defraud taxpayers by engaging in monetization not of bonds that were cheapest and thus bonds the Fed should have been buying, but merely was taking the other side of the trade in today's version of "Flip That Bond." And so the criminality continues unabated.

In Exhibit A for the criminal behavior by the Fed's OMO desk, the bonds that should have been bought are highlighted in Green. Instead, the flip bond, that was monetized the most, and completely in contradiction to market price dynamics such as supply and demand, is the one highlighted in red.

Oh, and with the S/A ratio well below the average, expect the Dow to close somewhere around 12,000 today as the gang rape of the middle class continues.



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plocequ1's picture

Well, There it is. Rally on

NOTW777's picture

memo from ben to PDs

monday assignment: buy AAPL and IBM

Ragnarok's picture

I love the smell of central planning the morning.

gwar5's picture

The Fed has exposed itself as a criminal enterprise.

The FRBNY is an ongoing crime scene.

Move our gold from under the FRBNY to West Point. Now.

papaswamp's picture

I suspect it is too late and they have already gone 'Tunisian' and bolted out of the country with the gold.

EscapeKey's picture

I'd like to know from where the money the UK supposedly used to buy $350bn of treasuries in 2010 originated. IF this was the result of currency swaps, then the FRB monetization rate could in theory be above 100% already.

It's too bad the UK don't release similar information - would be nice to see if American gilt holdings exploded in 2010.


blackbox's picture

It's not BOE holdings but overseas holdings acquired through London (think London offices of the primary dealers...)

EscapeKey's picture

Well yes, but transferring the cash through swap agreements or repos is hardly much of a magic trick.

Diplodicus Rex's picture

Newbie here, although I've lurked for the last 2 years. Well done ZH, you have been and continue to be my saviour. My gold holdings will provide a nice cushion when all of this finally blows up.

After ZH pointed this (UK holdings of USTs) out several months ago I wrote to the Treasury and asked for an explanation.

Here's what they said:

"Thank you for your email dated 18 October 2010 regarding the government purchases of US Treasuries.

May I start by stating that the $448 billion value [stated in the ZH article] of US Treaasury holdings is likely to be a summary of both private and public investment in US debt. Certainly, the quoted figure does not reflect the government's actual holdings of US Treasury Bonds.

At the end of August 2010, the UK government held $19 billion of dollar denominated assets. The exact holdings are confidential, but I can say that the majority of these holdings are US gvernment bonds, which are held in the UK foreign currency reserves.

The Treasury appoints the Bank of England as its agent to carry out the day-to-day management of the government's foreign currency reserves. An annual Service Level Agreement (SLA) between HM Treasury and the Bank of England specifies the parameters under which the reserves are managed. This SLA includes investment benchmark and limits for controlling credit, market and other risks. In addition, HMT and Bank officials meet on a regula basis to discuss performance."

I am an engineer and not an economist or trader. Apart from the the face value of that statement I am unable to read any more into it. Can anyone else determine any more by reading between the lines?

TruthInSunshine's picture

All we need is 200 trillion, and all might/could/theoretically should be well.

Racer's picture

And the killing of the poor, old and sick continues through high inflation of food and fuel prices

John McCloy's picture

Small price to pay to ensure the lives of the elites and their offspring are not impinged upon.

Blue Point Oysters for them.

Blue Ball Points for us placing the x on the dotted line for that easy free credit that later becomes our slave.

John McCloy's picture

The cartel recapitalizing the banks on our dime as was the goal all along.Why not just buy the bonds directly..cut out the unentitled middle man? Ben will do this until every single loss on their balance sheets is made whole from their risk taking.

  Then what? Free money goes away..economy crumbles back into reality and it is time for money free money for the new losses. This is the so called "Economic cycles" we have experienced. They are only becoming more and more evident in the past few years and the next "cycle" will be a doozy.

I Am The Unknown Comic's picture

good one buzzsaw99, and here is another:

(Uriah Heep - Stealing When I Should Have Been Buying)


Downtoolong's picture

The Mafia Bosses must be feeling like a bunch of chumps these days. Their versions of organized crime are quite lame compared to this.


satansanus's picture

let them have it. let them have platinum buttons on every suit, let them drink 10,000$ bottles of wine everynight, let them have 1,000 volkwagens with lamborghini badges.

And they will still feel lost

Hedgetard55's picture

I wonder if the Bernank has a schedule for 2011 with all the index levels he wants to see at the end of each week. This week's might say 12,125 for the Dow. I bet Harry Wanger knows.

youngman's picture


Heres a better song for PM´s...paper money....Ronnie montrose with Sammy Hagar singing in 1974

DB Cooper's picture

Thank you Tyler.  I'm glad someone is watching this - paging Ron Paul.  Is there any representative of the people out there?

thepigman's picture

Incredible that the Bernank is running

the biggest economic fraud in history.

No more free markets.

WineSorbet's picture

Who said crime doesn't pay?!?

Racer's picture

It doesn't pay if you are one of the sheeple, then they come down on you like a tonne of bricks

maneco's picture

Criminals eventually get caught. I hope.

aztrader's picture

I wonder what the commissions were on these trades?............

tonytiger's picture


We need to put this in from of our Congressmen and women to make sure they understand that they are sitting on top of the biggest criminal enterprise in history.  We must be persistent about this, so that they cannot say they didn't know.  Let them know that 2012 isn't that far away and if they don't do something, we will!



davepowers's picture

great catch, Tyler


flow5's picture

Too bad there's not a "finders fee" like the one given out by the IRS.

cranky-old-geezer's picture

This crap will go on till the dollar is worhless.

That's the plan.

Buck Johnson's picture

They know that these bonds are junk and that's why they are being flipped as fast as they are being "bought".  Our financial system is going to implode and it will be the bond's that act as the lake of gasoline.