• Monetary Metals
    07/28/2014 - 02:38
    Notice the “icicles” dripping all over the place? They occur at different times of the day. What are they? Each one is a brief but dramatic price drop.

Open Market Operations

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Live Webcast Of Obama Demonizing Oil "Speculators"





After Obama's "fairness doctrine" was roundly rejected by the Senate last night as the doomed from the beginning Buffett Rule was voted down, Obama needs to find some more evil villains for society to demonize, and whom to blame for the failure of central planning, or rather its success in pushing gas prices to all time highs. Today - it is that mysterious, amorphous blob of vile, conspiratorial henchmen known as "oil speculators." Forget that these "speculators" are merely conduits for the Fed to conduct its open market operations, forget that the same free liquidity that drives stocks up relentlessly in nominal terms (what? no demonization of evil stock pumping speculators?), even as it produces ever increasing inflation in all those items not tracked by the Fed, forget that Obama's speech is about to be replica of Jimmy Carter's Crisis of Confidence platitude in 1979. Finally forget that the biggest speculator is none other than the White House with its periodic release of SPR release rumors any time WTI approaches $110. Forget all that, and merely focus on the hypnotic, undulating intonation of the engrossing, populist sermon: that is all that is demanded of you. Everything else is to be ignored. And now since the time of "fairness" is over, it is time to do a shot every time "speculator" is uttered. And get ready for many, many CL margin hikes.

 
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Blythe Masters On The Blogosphere, Silver Manipulation, Gold-Axed Clients And Doing The "Wrong" Thing





For all those who have long been curious what the precious metals "queen" thinks about allegations involving her and her fimr in gold and silver manipulation, how JPMorgan is positioned in the precious metals market, and how she views the fringe elements of media, as well as JPMorgan's ethical limitations to engaging in 'wrong' behavior, the answers are all here.

 
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Tail Risk Hedging 101: Credit





With volatility so low and risk seemingly removed from any- and every-one's vernacular, perhaps it is time to refresh our perspective on downside and tail-risk concerns. While most think only in terms of equity derivatives as serving to create a tail-wagging-the-dog type of reflexive move, there is a growing and increasingly liquid (just like the old days with CDOs, so be warned) market for options on CDS. Concentrated in the major and most liquid indices, swaption volumes have risen notably as have gross and net notional outstandings. Puts and Calls on credit risk - known as Payers and Receivers (Payers being the equivalent of a put option on a bond, or call option on its spread) have been actively quoted since 2006 but the last 2-3 years has seen their popularity increase as a 'cheap' way to protect (or take on) credit risk - most specifically tail risk scenarios. Morgan Stanley recently published another useful primer on these instruments - as the sell-side's new favorite wide-margin offering to wistful buy-siders and wannabe quants - noting the three main uses for swaptions as Hedging, Upside, and Yield Enhancement. These all have their own nuances but as spreads compress and managers look for ever more inventive ways to add yield so the specter of negative gamma appears - chasing markets up into rallies and down into sell-offs - and the inevitable rips and gaps this causes can wreak havoc in markets that have momentum anyway. Given the leverage and average notionals involved, understanding this seemingly niche space may become very important if we see another tail risk flare and as the Fed knows only too well (as it suggested here) like selling Treasury Putsderivatives on credit are for more effective at establishing directional moves in the the underlying than simple open market operations.

 
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Antal Fekete Responds To Ben Bernanke On The Gold Standard





Yesterday, Ben Bernanke dedicated his entire first propaganda lecture to college student to the bashing of the gold standard. Of course, he has his prerogatives: he has to validate a crumbling monetary system and the legitimacy of the Fed, first to schoolchildrden and then to soon to be college grads encumbered in massive amounts of non-dischargeable student loans. While it is decidedly arguable that the gold standard may or may not have led to the first Great Depression, there is no debate at all that it was sheer modern monetary insanity and bubble blowing (by the very same professor!) that brought us to the verge of collapse in the Second Great Depression in 2008, which had nothing to do with the gold standard. And as usual there is always an other side to the story. Presenting that here today, is Antal Fekete with "The Gold Problem Revisited."

 
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China Cuts RRR By 50 bps Despite Latent Inflation To Cushion Housing Market Collapse





It was one short week ago that both Australia surprised with hotter than expected inflation (and no rate cut), and a Chinese CPI print that was far above expectations. Yet in confirmation of Dylan Grice's point that when it comes to "inflation targeting" central planners are merely the biggest "fools", this morning we woke to find that the PBOC has cut the Required Reserve Ratio (RRR) by another largely theatrical 50 bps. As a reminder, RRR cuts have very little if any impact, compared to the brute force adjustment that is the interest rate itself. As to what may have precipitated this, the answer is obvious - a collapsing housing market (which fell for the fourth month in a row) as the below chart from Michael McDonough shows, and a Shanghai Composite that just refuses to do anything (see China M1 Hits Bottom, Digs). What will this action do? Hardly much if anything, as this is purely a demonstrative attempt to rekindle animal spirits. However as was noted previously, "The last time they stimulated their CPI was close to 2%. It's 4.5% now, and blipping up." As such, expect the latent pockets of inflation where the fast money still has not even withdrawn from to bubble up promptly. That these "pockets" happen to be food and gold is not unexpected. And speaking of the latter, it is about time China got back into the gold trade prim and proper. At least China has stopped beating around the bush and has now joined the rest of the world in creating the world's biggest shadow liquidity tsunami.

 
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Daily US Opening News And Market Re-Cap: February 10





Heading into the North American open, EU equity indices are trading lower following reports that Eurozone Finance Ministers have dismissed as incomplete a budget presented to them by the Greek party leaders. In addition to that, EU lawmakers have warned Greece of more intensive involvement in the Greek economy to improve tax collection and accelerate the sale of state-owned assets. The Greek Finance Minister Venizelos said that Greece must make a “final, strategic” decision Greek membership in the Eurozone over the next six days as it decides on new austerity and reform measures or faces leaving the single currency. However, according to sources, German finance minister told MPs, Greek reform plans would bring debt to 136% of GDP by 2020, instead of targeted 120%. So it remains to be seen as to whether Greece will be able to meet the looming redemptions in March. Of note, analysts at Fitch said that the ongoing Greece talks stating that the country must secure an agreement to cut its debt burden in the next few days to prevent a “disorderly” default.

 
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How Safe Are Central Banks? UBS Worries The Eurozone Is Different





With Fed officials a laughing stock (both inside and outside the realm of FOMC minutes), Bank of Japan officials ever-watching eyes, and ECB officials in both self-congratulatory (Draghi) and worryingly concerned on downgrades (Nowotny), the world's central bankers appear, if nothing else, convinced that all can be solved with the printing of some paper (and perhaps a measure of harsh words for those naughty spendaholic politicians). The dramatic rise in central bank balance sheets and just-as-dramatic fall in asset quality constraints for collateral are just two of the items that UBS's economist Larry Hatheway considers as he asks (and answers) the critical question of just how safe are central banks. As he sees bloated balance sheets relative to capital and the impact when 'stuff happens', he discusses why the Eurozone is different (no central fiscal authority backstopping it) and notes it is less the fear of large losses interfering with liquidity provision directly but the more massive (and explicit) intrusion of politics into the 'independent' heart of central banking that creates the most angst. While he worries for the end of central bank independence (most specifically in Europe), we remind ourselves of the light veil that exists currently between the two and that the tooth fairy and santa don't have citizen-suppressing printing presses.

 
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Presenting The World's Most Profitable Hedge Fund Ever: FRBNY LP





When one has $2.9 trillion in costless AUM (because if the cost is breached, one just doubles down, especially if one prints the money), it is not all that surprising to generate $77 billion in profits in one year (think of the hubris emanating from that particular year end letter), or even $385 billion in profits in the past 10 years. Yet it is still a stunning number considering the rest of the $2 trillion hedge fund industry lost about 10% in 2011. Which is why we all bow down to what is without doubt the world's most lucrative and profitable generator of P&L in history: the Federal Reserve, which for the second year in a row has printed (pun intended) over $70 billion in profits. And who is the lucky LP? Why the US Treasury of course, which for the second year in a row will pocket all the proceeds from PM Ben's immaculate trading perfection. Of course, there is one caveat for this spotless performance sheet: what happens when Fed interest expense surpasses interest income? But why worry - everyone tells us this can never happen, so it obviously can never happen...

 
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China Will Suspend Open Market Operations Tomorrow In Response To Liquidity Freeze





Merely minutes after reporting the third daily surge in the SHIBOR we see a Dow Jones update which confirms that this liquidity escalation is far more serious than a merely transitory jump in short-term lending rates. Per DJ: "China's central bank said Wednesday it will suspend its regular open market operation Thursday, in an apparent response to the tight liquidity conditions in the banking system." As a result of the just reported 7 Day SHIBOR hitting 8.81%, the highest since October 2007, the PBoC will not conduct regularly scheduled open market operations tomorrow when it offers three-month paper, to mop up excess liquidity in the country. "The PBOC sold CNY1 billion ($154.6 million) worth of one-year bills at 3.4019% in its operation Tuesday, after leaving the rate unchanged at 3.3058% for the past 11 weeks. On Thursday last week, the PBOC lifted the rate on its three-month bills by eight basis points to 2.9985%, the first increase on the three-month central bank bill yield since early April. "It is difficult for the central bank to find enough demand for its short-term bill offering amid the severe liquidity squeeze in the money market. If it persisted with the three-month bill offering tomorrow, the yield would jump again, adding pressure to the central bank's operating costs," said a Shanghai-based trader with a local bank."

 
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Open Market Operations And Statistics





Zero Hedge presents its statistical findings regarding US Treasury Auctions and Permanent Open Market Operations

 
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Federal Reserve Open Market Operations: June 12





The chart below indicates the Fed's YTD open market treasury purchases. Roughly $32 billion in bonds/bills has been bought since the last update 2 weeks ago. The chart below can be traced back the Federal Reserve of New York's website here.

 
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Federal Reserve Open Market Operations: June 12





The chart below indicates the Fed's YTD open market treasury purchases. Roughly $32 billion in bonds/bills has been bought since the last update 2 weeks ago. The chart below can be traced back the Federal Reserve of New York's website here.

 
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The Federal Reserve's Open Market Operations





As recently many questions have arisen as to the involvement of the Federal Reserve in bond (and other) markets, I present the data provided by the Federal Reserve of New York regarding the Fed's Open Market Operations. The charts below summarize the individual (single-serving if you will) and cumulative purchases across both Treasuries and Agencies. In a nutshell, for 2009, the Fed has purchased $131 billion Treasuries and $63.8 billion Agencies.

 
Tyler Durden's picture

The Federal Reserve's Open Market Operations





As recently many questions have arisen as to the involvement of the Federal Reserve in bond (and other) markets, I present the data provided by the Federal Reserve of New York regarding the Fed's Open Market Operations. The charts below summarize the individual (single-serving if you will) and cumulative purchases across both Treasuries and Agencies. In a nutshell, for 2009, the Fed has purchased $131 billion Treasuries and $63.8 billion Agencies.

 
Tyler Durden's picture

The Federal Reserve's Open Market Operations





As recently many questions have arisen as to the involvement of the Federal Reserve in bond (and other) markets, I present the data provided by the Federal Reserve of New York regarding the Fed's Open Market Operations. The charts below summarize the individual (single-serving if you will) and cumulative purchases across both Treasuries and Agencies. In a nutshell, for 2009, the Fed has purchased $131 billion Treasuries and $63.8 billion Agencies.

 
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