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Treasury Explains Why It Pausing Its Reduction In Auction Sizes (Hint: It Has To Do With QE2)
One of the most fanfared decisions earlier in 2010 was the Treasury's
announcement that it would gradually begin to taper off the sizes of
upcoming treasury auctions. Too bad that that announcement assumed that
the economy would gradually stand to normalize, tax revenues would pick
up, and the Fed would never be forced to perform QE on itself again.
Alas, the recent issuance projection demonstrates, and as today's
refunding statement confirmed, this reduction is now over. In fact,
auction sizes may once again have to increase to accommodate the $100
billion a month incremental demand interest due to QE2. The statement
provided by Assistant Treasury
Secretary Mary Miller, who until recently was a fixed income manager at
T. Rowe Price, and even more recently stated that the Fed's buying plans won't affect UST issuance (oops), provides some insight into what the Treasury's more detailed refunding expectations are.
From the commentary to the refunding statement:
In recent months Treasury has reduced coupon offering sizes in the front-to-intermediate sectors of the nominal coupon curve. In total, these cuts have reduced Treasury’s annualized borrowing capacity by $328 billion. Based on current fiscal forecasts, coupon auction sizes are likely to remain steady over the coming quarter. Treasury will continue to monitor projected financing needs and make appropriate adjustments, as necessary.
And some other soundbites from Miller:
- Treasury's Miller says expects to reach debt ceiling sometime in the first half of 2011 (the Zero Hedge call is for a February 2011 event)
- Treasury's Miller says will be watching Fed easing plans, both Fed and Treasury want to maintain well-functioning Treasury market
- Treasury's Miller says Treasury has aligned borrowing to fiscal outlook, wants to maintain cushion for changes in outlook
- Treasury's Miller says wants to keep bills market deeply liquid, sees current level of 21% of issuance as appropriate
- Treasury's Miller says any steps Treasury will take to curtail auction sizes will be gradual
- Treasury's Miller says Treasury is not considering additional coupon issuance in response to potential Fed easing
That last one is a particularly gross misrepresentation of the truth. What is should advise is to look for the front-end and especially the belly (5-7 Y) to see a notable increase in auction size. Which is troubling because it means, as Zero Hedge has been noting since late 2010, and as Bruce Krasting and others have pointed out, that very soon the duration of the UST curve will once again begin to collapse. And for all those who have expressed a concern about the average maturity of outstanding debt (not to be confused with average duration of securities held by the Fed), the US Treasury has added a new function to its website, allowing for tracking of all the nuances associated with the treasury curve. The Excel file can be found here (we suggest bookmarking it).
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Hmmm Im sure No Mas and Harry will be around to say the FED is 'pausing its reduction in size' due to 'all is well'....
But will the markets and world agree? I dont think so.
QE2 has been the feast for the markets for 2 months and a 12% rise, now Ben's trying to tell me he has consumed his cake, yet it still sits in the icebox?
BULLSHIT!
Change(d our minds)!
Wow! Gold is crapping. Looks like "official" QE2 (unofficial, who knows) may not the size expected...
Silver also looking remarkably shitty today, commodities across the board are mostly red. Yeah, I'm thinking the expected nuclear bomb (2-4 trillion) is going to actually just be a suitcase nuke (~500 billion).
Maybe not... Maybe they are hitting it down hard right before the announcement.. So that when the announcement is big, the following surge in PM's and other commodities will have to rally out of a hole..
1355 -> 1327 in about 15 minutes. Now back up slightly to 1336. Yep - QE2 must be low.
if you think that 1355 to 1327 is a tell tale sign of qe2 you havent been trading the gold market long enough. thats a 2% move. classic sell the rumor buy the news.
All is not well Sheep-Dog; but all is getting better. These are the steps being taken by the PTB to keep things getting better.
Will it work? If I knew I would never have to reverse a position.
Will printing trillions out of thin air 'work'? Yes, its guaranteed to completely destroy the currency and everything else as has been the solid result every other time its been done.
The sheer fact that this is an acutal threat, and the yield curve may just collapse into a cataclysm of financial soup, is enough reason for me to stock up on supplies.
Looks like Gold and Silver think there will be no QE2, wow look out below....
Yeah, someone just pooped in gold's refrigerator.
Great buying opportunity if you ask me. Buy some and buy some more.
Looks like the big boys are front running Gold/Silver
Down $30.00 in a few minutes
Everything is a scam even paper Gold/Silver/Oil
Looks like there could be a large jump in PM's after the announcement.
One last "Shake" of weak hands and "Short" covering as the fruits fall ?
Anyone that can afford to trade Gold/Silver (on the big market) knows the fraud they are trying to perpitrate.
They are not stupid Ben !
Watch your stops LOL!!!!!!!!!!!!!!!!!!!!!!!!!
yeah, look at PMs tank hard. No news yet?
Someone's got the news. It just ain't us.
that's the only truth
WTF????
The way they're hammering gold and silver right now, while stocks just sit there looking stupid, I'm expecting 1 trillion QE right off the bat.
I guess its one last push down to get a nice fat position before lift off.
You know these guys need to make extra fat bonuses, since the dollar will become worthless, so whats a few extra zeros added to the end of the return
Yeah if I didn't know any better I'd say these markets are manipulated.
Maybe Bart Chilton and the CFTC should start an investigation.
Things are getting squirly. Buckle up today is going to be a rough one.
Obviously someone is either privy to the feds announcement or it's a PM tank job before afternoon lift off.
I'm betting this QE isn't going to be as big as expected. Could be wrong but thats my guess.
Alas, poor Turbo Timmy! Bernanke knew him felatio.
http://forexnewsnow.com/economic-events/quantitative-easing-2-updates-ru...
I have no idea what the Fed will do but I find it interesting that rumors of alternative options are released via the press at almost at the moment the PM's start tanking. Hard to believe said rumor 'creators' were not poised to take advantage of the drop.
The surity of QE2 really seemed to erode over the last couple weeks. I would be surprised if a much broader range of options didn't at least get an open hearing at the meeting.
My feeling is some sort of half-measure. $500 billion, in $100 increments or something. Backing out without backing out.
I wonder how Bernanke views last nights election results. Does he see the Repubs victory as a demand for austerity by the public and respond in kind by reducing QE2?
Or does he see the call for austerity as a threat to all his good work and now he sees the need to put even more liquidity in the system if there is a threat by Congress now to reduce spending?
Austerity by the public? Who are we kidding with 40 million plus on food stamps and a 16% unemployment/under-employment rate? Austerity would last all of two weeks before the masses clamor for more free money.
That's tough to say. I think that the elected govt has basically punted to the Fed to deal with the economy. I think that the GOP will be the same. I haven't heard any real proposals from them. They don't want to take ownership of this economy, so are likely to just avoid it and point fingers.
So Bernanke might feel more empowered, and in fact relied upon, to maintain control of the recovery how he sees fit.
Just ran the numbers. If Fed goes to Goldman $2T of purchases over 18-24 months, there will only be $2T of debt left in the open market. Which means we are free to a a gazillion dollar stimulus, get to it!
If QE2 Goes to the Goldman Extreme of an Eventual $2 Trillion, There Won't Be Much Debt Left for the Open Market
From earlier: by Turd Ferguson
on Wed, 11/03/2010 - 08:44
#695522
I wanted to chime in before the morning got to busy. Didn't know where to post so I thought I'd use this sticky.
Gold, obviously like everything else will be range-bound today ahead of the "big announcement". As mentioned last week, 1365 will be defended at all costs by the EE as they desperately try to buy time. Blythe feels that IF they can hold 1365, they'll have painted the daily chart with a head-and-shoulders top and that should be enough to keep gold in a box for quite a while. You can see it already this morning. Gold again tapped 1365 only to be immediately beaten back by an avalanche of paper gold sell orders.
So, the question is, what happens this afternoon? I fully expect a "sell the news" type of event, at least in the very short term. I would imagine that the quick reaction will be a sharp $ rally and selloff in gold, if anything because Blythe will be waiting with an abundance of sells to overwhelm the bid right around 2:20. Some other nervous machines will kick in and gold may drop as low as 1325-30 pretty fucking fast. Blythe will then, cautiously, sit back, cross her fingers and pray.
At that point, I expect the buyer(s) of size to appear, as if on cue. Gold turns and then rallies sharply back to 1350 or so. From there, let the QE news go global and sink in for a while. Gold rallies more tomorrow and finishes up for the week. A close above 1365 on Friday will be enough to cause major headaches for Blythe and her minions.
If I'm right and all of this plays out somewhat accurately, gold will trade through 1400 sometime next week and then on to 1500 by 12/10/10.
Obviously, Blythe decided to act early. The question is, what does this mean?
To me, the only reason for smashing gold now is this: The EE either knows or suspects that the QE2 announcement is going to be larger than anticipated and, therefore, PMs are going to rally sharply. So, crush the PMs now in order to cover shorts at lower prices before the blastoff.
Again, if anyone doubt the existence of the EE and their influence on today's action, simply look at a one-minute chart of todays' action. Violent one-minute downdrafts galore. Only the EE has the power to overwhelm the bid like that. They are clearly trying and succeeding in dropping price before the announcement. Again, why before? They are clearly afraid of getting their collective nuts and ovaries in a vise this afternoon.
I am very confident of a big price move UP later today.
I'm very confident that I don't know what the hell will happen. But I hope you're right.
Add me to the confidently non-confidents.
Thanks for that - BTW for the unwashed like myself - pray tell what is the EE? Clearly related to the PPT...
Sorry for the code language.
The EE is the Evil Empire. Also know as the "cartel" or the "bullion banks". Primarily led by Blythe Masters at JPM. She's the Emperor. The Comex is their Death Star.
Thanks. I needed a few definitions, too even though I got the gist of it. Love the analogies, lol!
Thanks Turd,
YOu want to see an interesting chart, look at the 1 minute of SLW.
10.22- big move up on almost nothing volume, then rapid moves down.
Does anyone have the "nuts' to tell me with a straight face this isn't being gamed like there is no tomorrow......
Does anyone have any updates on how many "short" are still out there on gold/silver or is that all being cleaned up right now????
The latest data is the COT from last week but since that report is current only through last Tuesday, its worthless.
And note that today's action is a Wednesday which means we won't be able to even remotely see the EEs footprints until a week from Friday.
An absolute, utter fucking joke of opaqueness and deception.
Thx,
isn't that convEEEEEEnient
A pull back on precious metals? Buy more!
What would it take for the Fed to win some respect:
1. Raise FF rate to 2% effective tomorrow morning. Stop stealing $750 Bil/yr from retired savers and giving it to the TBTF banks.
2. Work with Treasury to provide a blanket govt guarantee on bank deposits and money market funds . provide as much liquidity as needed to support this.
3. Clean up the TBTF banks. No more funny business, fraud, accounting gimmicks and huge bonus pools. Stop that .
4. Forget about trying to deprciate the Dollar. It will not have a beneficial effect on the economy and may backfire very badly. The Yen has gone from what 250 to 80 and Japan still runs a trade surplus with the US .
Our government would have to cut spending to get to a balanced budget. Otherwise, the Fed would still eventually have to monetize as the interest on existing debt would just continue to grow.
Ben hows this? Sur set an inflation target of 2% if you like but raise the FF rate to match your inflation target. After all you dont want to be seen mugging granma down at the ATM do ya?
Or they could be trying to hit the ceiling before the next congress comes in. Why risk a filibuster by Rand Paul?
Like I said, I've been holding gold and precious metals for years and expect to see it pull back a fair bit. When everyone's on the same side of the trade, the opposite happens.
Just wait until you see stocks take off like a rocket on Fed announcement. Same reason as above. If stocks were going to sell the news, why wouldn't we be down 3% right now? Because no one is selling, nor will they on the announcement. Just the opposite will occur - spike in equities.
No one owns stocks excepts the FED and the banks. Go ahead, let them pump their own shares. Net loss to them every time they do because no retail is left dumb enough to buy the crap. Keep on buyin, FED!
Could it be that the threat posed by individual US state's fiscal crisis is extremely underestimated and Bernanke's newly formed QE plan is some sort of backstop for each underwater state?
Y'all might want to review this ZH post...
http://www.zerohedge.com/article/bernanke-tap-lightly-0?
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