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Today's POMO: Fed Buys Back Over $1 Billion In 30 Year Treasuries
The Fed's fix for a few billions bonds was satisfied once again, after taking a brief respite yesterday. In today's POMO, $2.3 billion bonds was repurchased, with well over $1 billion around the year 30 maturity. CUSIP QB7 was a May 7, 2009 issue: primary dealers can breathe a sigh of relief that they have to hold $353 million less of this, courtesy of the US taxpayer/$ printing press.
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Absolutely, we are not monetizing the debt.
Timmy Geithner
C'mon. $1 Bil isn't even money, is it?
Santelli is the only one who knows what he is talking about on CNBC: http://newsbusters.org/blogs/jeff-poor/2009/06/03/santelli-claims-geithn...
It doesn't matter if the Fed is playing games. It only matters if others care if the Fed is playing games.
As long as people can make money off this corruption, the question of "fair" or corrupt" or "lies" is moot.
The cry for justice won't come from those who profit from the illegal activity. When everyone has their fingers in the pot, who in their right mind would demand the pot be taken away?
This is the central idea of the Mafia. Everyone has an interest in keeping the racket going. The common interest of the corrupt (as well as the pigeons picking up crumbs) is for more of the same.
That's why I think this whole mess (great depression II) will end in a nuclear war and a second american revolution. There's no way we can pay off the debt. Period. The only way is to print our way out of it and launch the nukes at China. The latter is necessary because oil will be trading at $500 a barrel and countries do go to WAR over it.
George Orwell
Cuckoo! Cuckoo!
Well said. I know in the MBS market all the players are more than happy to have the Fed printing money to support them in the short term. At 7% mortgage rates there would be a lot fewer refis, and therefore a lot fewer MBS traders, post-closing ops folks, QRM support folks, etc. Without the Fed printing many of them would be out of a job, why worry about what the money printing is doing to the country, that is for others to worry about, isn't it?
Could someone explain how this works or confirm if I have this right.
The US Treasury (i.e. the US Government) to finance the budget deficit, issues long dated paper to the markets (mainly snapped up by primary dealers like Goldman etc), on some sort of gentlemans understanding that a few weeks or months later, the Fed will buy those same Treasuries back from the same dealers with printed money or by expanding the money supply. Rinse and Repeat and this is how the whole government deficit is being financed?
Thank you for playing. You now know more about our monetary system than 99.9999% of the American populous.
And one step further. The Fed has to buy it because no one else wants most of it right now. Otherwise, rates on those bonds would fly higher than the market has lately.
No one wants 30 years bonds. Who knows what will happen in next 30 years. Very soon, who knows what will happen in next 5 years. Therefore, no one wants five years notes.
Very nice replies.
To add to the mix, all this mysterious purchasing (monitizing) of Treasuries is supposedly going to end in October. Then the auctions will start getting fun.
That won't take away from what the Fed is still doing with Agency MBS. We still have at least a $trillion of the Fed pissing away to buy assets that are essentially worthless sheets of electronic paper.
It warms my cockels to know that Ben and Timmy are in charge of things.
This is precisely why the market will drop in the fall. With the liquidity party over, who is going to pump the market and where will the money to pump the market come from?
Now that the Treasury has issued most of the paper it needs for the next 6 months, time for a little down draft in equities to scare the sheep into buying that very same paper.
Rinse and repeat until everyone is exhausted and broke. Except those that understand how to play the game.
How is this not sending inflation through the roof?
Can someone please answer this question. With the extra money, the inflation would be skyrocketing...
The discussions at this site have been en lighting me.
Thanks
It's not even a gentlemen's agreement / conspiracy theory (except in a few instances, like that particular 7 year auction - THAT was pure manipulation IMHO) - the market knows the Fed will backstop $X dollars of purchases, so they feel mighty comfy buying at auction knowing the Fed will be there to take the bonds off their hands.
the MBS market is even more ridiculous, since you sell forward your pipeline, you know before the loans are even closed that the Fed will be buying, and you have agreed on a price.
Thank you both and apologies for posting twice.
Thank you very much for keeping on top of this TD.
What about QC5 on the same page? Wasn't that a 30-yr just issued last week, 8/15/39? How else do you get to 8/15/39 if it's not a 30-yr?
That's 539$M of that puppy.
yes, that was issued 8/17/09
http://www.treasurydirect.gov/instit/annceresult/press/preanre/2009/R_20...
odd that was missed in the write up.....anyhoo, repeat after me: the economy is recovering, the fed is not monetizing, the stock market is not manipulated, gold is bad, T3 is a great American, and the federal deficit is totally manageable.
I don't fully understand how this works folks, I wonder could someone confirm that my understanding is correct.
The Treasury issues long dated paper to Primary dealers etc every so often in order to finance the US govt deficit. The PD's would be insane to buy this stuff (as in the long run it should technically be worthless given the US deficit), but there is a gentlemans understanding that a few weeks or months later, the Fed will buy that paper from the PD's with money they have "printed".
Is this how the whole thing works?
I assume the PD's take nice fees on both sides of this trade?
cheers
Nobody else wants long term US debt, so why should taxpayers be forced to buy it? When the inevitable high interest rates come, this debt will lose a substantial portion of its value. The Federal reserve is investing our money in a "toxic asset". To what end? How can you argue that the FED should be independent when it's doing these kinds of things with our money?
the taxpayers haven't bought anything in atleast 10 years... we are still paying off the first Iraq war binge
Offer-to-cover 3.25, the sellers are still desperate to unload, esp China
Offer-to-cover 3.25, the sellers are still desperate to unload, esp China
4.744 bid to cover here is much worse (footnote #5 at the very bottom of the page):
http://www.treasurydirect.gov/instit/annceresult/press/preanre/2009/R_20090819_1.pdf
Snake eats tail. More at 11.
ROFLMAO!
I keep seeing posts and prognostications about the end times with these serpent eating its tail shennanigans. But it keeps going like the eveready rabbit. Is there anybody out there that can show me a conclusive graph that you actually hit the wall after driving down a blind alley at 100mph?
Nothing I'm seeing in treasury charts show them going parabolic or getting ready for a massive blow off, so is it still a long way off? The dollar is tanking as predicted, gold is steady, so WTF?
I know it makes sense that you can't just fake your way out of a crisis and paper over the gargantuan default just over the horizon, but DAMN, is the day of reckoning a year away or a century away?
Comments?
That's the Energizer Bunny to you! ;)
I rarely post, but I must take a moment to laud TD and crew. This site is an absolutely amazing, invaluable resource. I get a big warm fuzzy every day when I read the original research and often hilarious, insightful comments by the great community on here.
Anybody want to stick their neck out and tell me when the serpent actually gags on its tail? I say this because I've been reading endless eschatological blogs including this one, waving hands at treasury auctions saying the big blow up is right around the corner, and DAMN I want to believe it, but has the ultimate ponzi scheme been created where the vassal states just keep gobbling it up? I haven't seen a single chart to convince me the bug is about to hit the windshield wrt treasury returns.
Things take longer than you expect, even taking into account you expect them to take longer than you expect.
I am brave. What the heck. I would guess, it will be year 2012.
Mmmmm.... nice tail.... tastes like chicken.
I'm guessing you are betting for the "end of the Mayan calendar" thing for all hell to break loose.
It's as good as time as any... as we may get a bonus of either (a) aliens or (b) Jesus coming to make an Earthly visit.
I'm sure I just offended 75% or more of the global population. It was a joke, folks!
There is a chart.
http://www.forexblog.org/2009/04/interview-with-karl-denninger-this-is-n...
It indicated that the year is 2015, however, my guess is
2012 by waving.
Why only $1 billion. Isn't normal buyback size more like 6-7 billion? With $1 billion is there enough juice to prop the equities tomorrow?
The debt won't be a problem for long:
http://www.theonion.com/content/video/u_s_government_stages_fake_coup
Preaching to the choir . . .
It'll be . . . interesting . . . to see how Treasury auctions proceed come October. After all, the Fed is not much of a bond vigilante, is it? It'll be bullish for the dollar, which will probably be ~76 DXY by then (unless those with foresight have assumed defensive positions already). Sure, the MBS flooring will still be intact, but the aforementioned scenario may be quite enough of a distraction.
Ah, I can hear the clamor for a second stimulus package already.
Leadership. Morals. A land where 'oath' has found it's price tag.
Check this out, I usually don't look at the agency debt monetization, but look how much they did last Friday.
http://www.ny.frb.org/markets/pomo/display/index.cfm?showmore=1&opertype...
And you wonder why those shares have been rising - once the debt is in the Fed's hands, who knows if they will even ask to be paid back?
5.6B is the largest of those operations to date.
Kind of funny how there is all this uproar over $3B in cash for clunkers, then on Friday the Fed prints 5.6B to buy agency debt and it isn't noticed.
absolutely great post, thanks for the link. there is no such thing as coincidence in the financial world. that SPX hit record highs on the year the same week the Fed goes nuts with agency purchases is no_coincidence.
F'n-A.
But there's no secret there... the Fed is devoted to buying $1.25 trillion of agency debt by the end of the year-- and my understanding is it will extend into 2010.
A $5.6 billion purchase is just one of many more steps to sweep worthless assets under the rug and into the lap of the taxpayer.
actually it is 1.25T of agency MBS, and 200B of agency debt.
My point was I don't pay much attention to the agency debt market, I was just surprised that they spent almost 3% of their allotment in a single deal, it was a much bigger purchase than the previous deals.
I suspect it had something to do with Fannie's reopening one of their notes today.
$1B is just noise. What is significant is that someone the fed likes had a hole burning in their pocket. They could not find a buyer for this 30 year crap, or it was a simple payoff for sucking all the 30 year in one day when issued.
Still what it says is that the returner of the 30 year did not want this hot potatoe (an alternate spelling, the way the teacher spelled it who handed it to Dan Quayle).
OK, you circled the number from May, but more interesting is the $539B from last week.
What is going on Tyler? Are you now spinning and shilling for GS and the Fed?
that is a pretty big miss. Maybe TD hired the "Judge" to edit these posts.
I can't wait until I get to pay off my mortgage in full with what it costs to buy a loaf of bread. That is going to be AWESOME.
Except your paycheque will not be able to buy the loaf of bread unless you are a black market dealer in moonshine and shotgun shells.
My sense is that the policies implemented thus far are not flawed-- in the sense they have been put in place primarily to avert financial disaster. To that end, the liquidity flooding, helicopter raining actions to date have produced the desired stalemate.good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
if you were a primary dealer and bought the bons last wek, since interst rates have gone down the bonds are now worth more. the bank sell them bakc to treasury and instand profits for banks to inject into the market and create asset bubbles.
also the profit means 44% percent of it gets to go directly into bankers pockets as bonus. that's the disgusting part. those who are buying the bonds know the fed will buy the back