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Today's POMO Results: $6.1 Billion In 2-3 Years Repurchased
The Fed purchased $6.1 Billion in CUSIPs with maturities ranging from 05/31/2011 - 04/30/2012. Primary dealers use proceeds to buy and sell (rinse, repeat) Fannie, Freddie, and GM (we jest, they would never do anything that flagrant). Yet you gotta push the beneficial liquidity story. (Statisically relevant question: have we had a down market on any POMO day?)
From the NY Fed:
Nearly half of the accepted $6,096 million in CUSIPs were 3 Year Treasuries auctioned off in 2009 (KB5 - January 7, 2009, and KC3 - February 20, 2009).
But monetization is something so much less than mere semantics.
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August 11th comes to mind. We had a measly 2.7 billion dollar buyback that wasn't enough to support stocks. There is definitely a strong correlation however.
Yeah, that was a HUGE mistake on the Fed's part, one they didn't repeat. Didn't they say they were going to slow down purchases at that time? To stretch out the remaining money? Well, they tried that, and it was a massive failure.
So today they buy $6.1, not that much less than the $7.5 they had been buying.
And they think they will be able to stop buying Treasuries? Not likely.
What's the formula? If $2.7 billion is not enough, where's the breakeven?
The words that stuck out for me were in the first sentence of the second paragraph.
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Now you're getting it. Don't forget to report on the $25B of MBS they will report on later this week, I think Thursday is the day they report that.
Look at oil. $75 a barrel. The greatest trade of my life, doubled my money since March.
What about printing $1.25T in 11 months to buy MBS didn't people understand?
Another statistically relevant question that I saw cropping up on the interwebs that I have been wondering about is the divergence between Treasuries and dollars that seems to have appeard since the start of QE. One would think that if the value of future dollars (treasuries) goes up, the value of the dollar would go up as well, but that has not been the case. Last week was the epitome of this divergence as treasuries rallied but the dollar was stifled (leading to a lot of pain for the bears). It seems to me like this divergence is an overstretched rubber band and should return to normal sooner or later.
I am not sure if the terminology I am using is correct here...but could you not call this contango in the dollar?
What you are referring to is the fact that Treasuries are becoming more "money-like" and raw dollars less so.
It makes perfect sense within the context of QE.
Please elaborate. It has yet to make perfect sense to me.
Some interesting papers at the following link, largely based around the idea that QE equals falling interest rates equals massive capital destruction and deflation.
http://www.professorfekete.com/articles.asp
There's some good stuff there. Nice short papers, clear, provocative and readable.
You're right. Very thought-provoking stuff, and absolutely scary as hell. I recently went all T-bills to prepare for a coming depression, and the supposed fall in commod. and PM prices that would accompany that. I'm literally trying to protect my life savings, and to be able to sleep at night. But now the notion that we're facing something truly unprecedented and unique, and that the dollar might be nearly useless,has me wondering if I've done precisely the wrong thing. Screw the people who did this to us.
Another divergence I noticed is the one between US Equities, Oil and EURUSD. When we hit the S&P and Oil high on Friday, EURUSD stayed below the Aug 5 high. This may be a sign of upcoming trend reversal, either in EURUSD or in the equities/commodities.
My view is that this bullet was fired Friday. This is to be used to close option positions set on Friday.
Today the market can go anywhere since the cash was spent on credit.
Duh .... 4 of last six POMO days had SPX close down:
8/10, 11,14,17 : down
8/19,21: up
so, what was the Offer-to-cover ratio?
Here is a list of PMO actions with SPX daily and weekly.
Date Submitted Accepted SPX Daily SPX Weekly 3/25/2009 $21,937 $7,500 7.07 3/27/2009 $23,361 $7,541 -12.74 43.63 3/30/2009 $8,132 $2,499 -21.54 4/1/2009 $16,948 $6,008 17.49 4/2/2009 $26,252 $7,496 19.85 33.43 4/6/2009 $11,644 $2,530 -4.27 4/8/2009 $31,296 $2,970 8.4 16.81 4/13/2009 $26,639 $7,370 3.4 4/14/2009 $26,401 $7,300 -15.38 4/16/2009 $15,559 $1,503 10.76 14.27 4/21/2009 $26,807 $7,000 18.83 4/23/2009 $15,990 $7,000 7.3 -2.04 4/27/2009 $23,388 $7,025 -5.31 4/30/2009 $11,741 $3,025 -3.78 14.7 5/4/2009 $29,058 $8,500 28.03 5/6/2009 $37,983 $6,948 15.58 50.02 5/11/2009 $10,426 $3,510 -13.75 5/12/2009 $22,857 $6,007 -2.17 5/14/2009 $27,086 $2,975 8.83 -40.11 5/18/2009 $15,271 $3,180 23.64 5/20/2009 $37,181 $7,699 -5.15 5/21/2009 $45,694 $7,398 -12.09 0.93 5/26/2009 $8,523 $1,550 23.33 5/27/2009 $18,819 $6,000 -16.89 30.46 6/3/2009 $21,114 $7,500 -10.75 6/4/2009 $36,628 $7,494 9.97 16.83 6/8/2009 $29,971 $7,500 1.02 6/10/2009 $10,979 $3,500 -3.58 8.09 6/16/2009 $31,316 $6,450 -13.63 6/17/2009 $26,203 $7,000 -1.18 -21.22 6/22/2009 $20,736 $7,497 -25.09 6/25/2009 $9,526 $3,249 20.81 0.77 6/30/2009 $23,564 $7,000 -7.83 7/1/2009 $9,483 $2,999 2.51 -23.43 7/6/2009 $18,151 $7,000 4.45 7/9/2009 $17,094 $2,999 1.4 -15.14 7/14/2009 $14,730 $7,500 5.07 7/16/2009 $9,188 $1,499 10.57 60.81 7/21/2009 $18,502 $7,000 2.61 7/23/2009 $7,372 $3,000 22.22 37.19 7/29/2009 $11,707 $2,999 -2.51 7/30/2009 $20,308 $6,496 10.74 8.85 8/5/2009 $17,913 $7,248 -2.69 8/6/2009 $48,256 $7,000 -6.98 20.26
Okay...that did not post well.
Right, didn't post well, but at a glance I see negative correlation. Is that what you got?
If you are looking for a daily correlation, I do not see it in the data and I track most of the FED lending operations. Since the FED started, over the 49 operations the net SPX result on the day of the operation is +74.49. If you look at the week, the net result is +278.26. As I write this, the SPX is at 1027.23. Subtract the weekly total of 278.26 and you have SPX of 748.92.
Fed triva #1: How many PMO in 2008? Answer = 0
Fed triva #2: How many PMO in 2007? Answer = 7 for $8.4B
I getting a risk indicator
.good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
For each day there was an operation, did the market go up or did it go down? That's what I'm looking at, not the net results for all operations. I think that's the question that this particular Tyler Durden was asking also. I have all the data, but no time to crunch it right now.
In 49 operations...the SPX ended down on the day 23 times and up 25...today has not closed yet.
Look at the settlement date, not the operation date.
Well the market just spiked down while this is the time it usually spikes up on POMO days. Maybe it's just a delayed options expiration hangover, or are the big guns changing their target?
Haven't seen an intraday drop like that in several weeks, looks like the Tbill auctions didn't go that well.
Well the sharp drop in the yield happened around an hour and a half before the subsequent drop in equities. It seemed to really coincide with the POMO, which I thought happen around 11:30. The tbill auctions are early afternoon, so I don't think they would have affected it at 11:30... Although advance notice could always go a long way, and I'm sure they already have this whole weeks' results planned out
But there was another good sized drop at 1:00 so I attributed it to the Tbill auctions, but I think the bid to cover was more than 3.0 on both, so that can't be it.
Credit weaseling at the Federales laundromat.
The IOU auctions went well...so it's not that. Perhaps folks are nervous of the rest of the IOU auctions and getting in front of them? Just a thought.
what goes up, will go down
the higher they go, the harder they will fall
keep shorting the stock market
This message brought to you by Goldman Sachs.
yeah that's the tip I got from Broad 125
It has to accelerate. The first banks went under with about 18 percent of bad assests on the books. The latest guarantee went under with 36% bad assets. So with enough accounting fudging we will be serviced by terribly underwater banking system and when banks start closing it will cost sooo much more to fix than the first ones to fail. By the time we get to AIG on closing we will find rotting corpses with 50 to 60% bad assets. If we close 120 banks next year it'll be twice or three times worse than the 100 to 120 that get closed this year. 6 and 7 billion used to be the daily window rates and it's becoming 12 and 13 billion.
http://www.321gold.com/fed/temp_bank_res.html
It also corresponds with the FRBNY announcement that the AFL_CIO is staying in charge of the New York FED for the rest of the year.
The IOU sales actually went well today so the drop must be due to something else.
Probably the POMO-market up days correlation dropped since the relation was published.
But it used to be right on the mark. When there is one market maker there are no rules, no technicals nothing. It goes up if the force it up or down otherwise.
They guys over here, in Europe, that went long full throttle today because at close s&p 500 was +0.9 must be sweating right now. FTSE MIB was up more than 2%
Across the curve still says you guys are doing a dis-service accusing such honest and moral instutions like the FED and Treasury or such illegal and immoral allegations. How dare you....hahahahahahahahahaha sorry, just could not keep it in any longer.
I like his website....I have learned a lot there. Learning something new about him now though!!!!
Mr. Jansen.....please note, I am not annonymous...and in fact, we have corresponded before.
What new are you learning about him? That he worked at the Fed for most of his career? What do you expect him to say?
His blog is OK on things like the action in USTs, but he really should cut out the commentary on MBS, it is kind of useless, "MBS is two ticks wider to swaps", etc. Not much help. There are much better blogs out there on that market, like the guys here, they are actually pretty good.
http://www.mortgagenewsdaily.com/mortgage_rates/blog/
But Haphasteus - CNBS anchors told me today that bank closings are no big deal. They would never tell 1/2-truths or outright lies, now would they?
d you don't even have to do a math problem to talk to him.
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
Snake eats tail. More at 11.
Thanks for shedding light, and staying on, the short-fused Treasury purchases.
I hope our Chinese, Russian, Japanese, and oil sheikh creditors note your columns, to learn how they are being rooked.
Wake up, creditors. Save yourself -- quit buying our junk and sell your 'assets' before they are toasted -- so that we can throw off the shysters and shylocks in Wall Street and D.C.
DJI is not allowed to go negative today.
Boyz are working hard at it!
TSX reversed a 70 point gain to a 55 points negative.
Could be a good week to short in the face of 200 billion paper auction.
I was planning to increase my short, but didn't expect it to go negative intraday as such major moves seemed to be reserved for the privileged after-hours traders, until now that is. Now if we close even slightly negative, I don't like the setup it would make for turnaround Tuesday...
In general though, I think they would want to orchestrate a flight to safety from equities this week, just thought they would focus it on the longer maturities as the ones today have more intrinsic demand. Then again maybe they expected us to expect that and went the other way? This market is the ultimate poker game, except the guy with the most chips also has a printer up his sleeves...
http://www.ritholtz.com/blog/2009/08/boom-and-burst-dont-be-fooled-by-fa...
The flying paper this week makes the POMOs look like spitting in the wind. Unless the Fed eats all the paper in the next POMO.
Where oh where is my liquidity?
Risk aversion by the banks and retiring/jobless is making credit disappear and investment risk collapse.
The problem now is that the more the market goes up, the less likely anyone will over risk capital. All the capital now is going to executives who are cutting the large pieces of pie for themselves. Until executives give up their appetite for corporate capital, there will be no recovery.
Last paragraph should have been:
The problem now is that the more the market goes up, the less likely anyone will offer risk capital. All the capital now is going to executives who are cutting the large pieces of pie for themselves. Until executives give up their appetite for corporate capital, there will be no recovery.
So what changed today... ramp up was not achieved today between 2-4pm... Nic's letter on 8/19/09 says:
In the meantime, while I hate conspiracy theories (too frequently used as an excuse for failure), I will remain very cautious assessing the reports on the V recovery and will keep an eye on the few remaining POMO days when the Fed buys back treasuries. The market performance between 2PM and 4PM on those days is equivalent to the entire rally since the lows in March...