"In Feb 2013, Fed Will Buy 75% Of New 30y Treasury Supply"

Tyler Durden's picture

We urge readers to read the bolded section below, which comes straight from this quariter's Treasury Borrowing Advisory Committee (i.e., Primary Dealers) presentation to the Treasury Department, and explain, with a straight face, just how the Fed will ever be able to not only stop monetizing debt and injecting $85 billion of flow into the stock market, but actually sell any holdings.

Federal Reserve Holdings (1 of 2)

As of Dec 26, 2012 the Federal Reserve System Open Market Account (SOMA) held approximately $300 billion in 21+ year US Treasury debt

  • SOMA holds 41% of the 30y Treasury bonds issued since 2009
  • In Feb 2013, Fed will buy 75% of new 30y Treasury supply

Twist and QE operations have significantly lengthened the WAM of the Fed’s SOMA portfolio

The Fed currently owns 29% of all marketable 10yr Equivalents outstanding

Full TBAC presentation:

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optimator's picture

What's the big deal.  My wife pays off my credit card with her credit card checks.  Works well for us.  I can't see any problems in the future coming up.

Kreditanstalt's picture

Tell me this: Why do they ever have to sell anything?  They don't. 

kaiserhoff's picture

Because someday something big will break.  On the other hand, if Ben bails California, all bets are off.

To the moon, Alice.

Bob Sacamano's picture

Correct - they do not have to sell. 

They do not have to worry about "losing" money or wiping out their "equity" -- these concepts are foreign to an entity that can create money out of thin air at will.  They live in a limitless world.  

Ham-bone's picture

That's really the right question - SO WHAT?  So the Fed buys 70% of every government debt instrument down to 5yrs or 3yrs or eventually 1yr.  Fed is the market.  SO WHAT?

So long as there is massive unemployment via continuing offshoring, lessening demand, technology, automation, robotization, etc. the lack of any wage inflation coupled w/ ever slowing GDP will allow Fed to continue saying "inflation is low".  Such stagflationary forces at work here and globally due to oversupply, overpopulation, overindebtedness...so what stops the Fed and CB's from playing this co-ordinated game indefinitely???

The case for PM's is quite clear but not so sure the end is near for the Fed, for the dollar, for the lying sons of bitchs in charge???

Liquid Courage's picture

Limits? Maybe when a cereal box is so small you can slip it into your shirt pocket a few sheeple might start grab a clue.


Quality (Quantity) Dilution ... there's yer Limit.

philosophers bone's picture

When they are done QE'ing, they will create new security with a fancy name (U.S. Patriot Secure Trust Fund?), the Fed will transfer all of their over-price, low interest rate bonds into it and the federal government / primary dealers will stuff a bunch of it down the throat of pension funds / individuals in exchange for any cash that sitting around in those accounts.  Then interest rates go up, the value of U.S. Patriot Secure Trust Fund goes down and that stage of the ongoing theft will be complete.  What other sceanario is there?  How can Fed allow interest rates to go up (thereby tanking value of the bonds they hold) before they unload them.  I'd be interested in knowing others' scenarios.

seek's picture

My scenario: ZIRP forever until the US defaults, breaks apart into smaller countries, or the revolution begins.

Once that happens, debt is zeroed out and we start over.

Poor Grogman's picture

How about this one.

Controlled deflation just like Japan with the fed pouring money into the bucket just fast enough to keep the water level going down slowly, as all the debt in the system sucks up the money.

Inflation in hard assets as cash finds a home, with a special boost for anything oil intensive, and the rest desperately trying to deleverage. ( with mixed success).

Massive growth of the state as government spending becomes one of the only source of those much needed USD.

No exit plan for the fed ( it owns most stuff eventually)

This is not a unicorns and rainbows ending I know, but if left UNCHALLENGED I'm afraid that's what we might be stuck with...

Seer's picture

Excellent call.

War bonds.

There's still plenty of anti-commie folks out there (and a trunk load of propaganda and linked memories) such that they can conjure up the ultimate villain - China.  Suspect the Japanese vs. Chinese stuff going on right now is kind of the warm-up to get people thinking about "China Bad!"

lasvegaspersona's picture

So we can has some too?

Kai's picture

Might as well get on with it.  Someone make an app that tells you what % of America's total assets is held on the Fed balance sheet.

I want to know when the money printers own more than 10% of my country outright.

JJ McApe's picture

Well, it could be worse...

  • In Feb 2013, Fed will buy 75% of new 30y Treasury supply
  • In Feb 2014, Fed will buy 100% of new 30y Treasury supply
  • ?



    Motorhead's picture

    I love it...the Office of Debt Mgmt...they must be some busy mother fuckers at that office.

    ebworthen's picture

    Tyler(s) asked:

    "...explain, with a straight face, just how the Fed will ever be able to not only stop monetizing debt and injecting $85 billion of flow into the stock market, but actually sell any holdings."

    Dear Taxpayer,

    The Treasury Department is pleased to tell you that your entire (IRA/401K/Pension) has been converted into a blend of 1, 10, and 30 year Treasury Patriot Bonds backed by the full faith and credit of the U.S. Government.

    You will have access to the FULL amount of your investment in our great nation when you reach age 70 or die (whichever comes first). 

    Be aware that if you die any proceeds to spouse, children, or designated recipients will be taxed at 59% and any capital gains since this conversion occurred at a rate of 25%.

    The FED will set the Treasury Patriot Bond rates, but be assured that it will be at least equal to the Revised Chained Cost of Living Allowance (RC-COLA) of Social Security.

    Withdrawals from your funds can only be taken in apportionment with your life expectancy.  For example, if you are a male aged 70 and average life expectancy is 86, you may withdraw 1/16th of your holdings per year and only in monthly installments and no lump sum withdrawals are allowed.

    In times of national crisis, your withdrawals my revert to the 1/32nd's or 1/64th's rule of apportionment, however, we do not foresee this occurring at the present time.

    We hope you appreciate the necessity of this conversion, and thank you in advance for your patriotism and commitment to restore the nation and support liberty.

    Jon Corzine
    Treasury Secretary

    RebelDevil's picture

    I've heard that before. My question is - How will they raid the retirement funds? Executive order? 

    ebworthen's picture



    "Dear Mr. RebelDevil,

    What 'raid' of retirement funds do you speak of?

    It is your money, the Treasury Department is merely safeguarding it from the vagaries of the markets and the uncertainties of our times by converting it to Treasury Patriot Bonds.

    For laws pertaining to this conversion please refer to the Patriot Act, the National Defense Authorization Act (N.D.A.A.), KELO vs. City of New London, and Executive Order 6102.

    The Honorable Jon Corzine
    Department of the Treasury"

    Au_Ag_CuPbCu's picture

    +100, Jon Corzine as Treasury Secretary was a real nice touch LOL!

    John Law Lives's picture

    Excellent!  Good stuff.

    By then, the Treasury Secretary might as well be called the Wealth Confiscation Czar.

    Seer's picture

    It's always some nice sounding name, "confiscation" isn't nice...  Try: Wealth Protection Czar.  Remember, it's ALL about "protecting" us!  Big Brother is just the bomb!

    Dr. Engali's picture

    + 1 That post needs to go in the archives. Well done.

    goldenbuddha454's picture

    That is the most accurate and best forward-looking statement I've ever seen.

    giggler123's picture

    Anyone else Fed up?

    Hedgetard55's picture

    FED gains/losses are nominal, not real. If they print a trillion bucks and buy bonds with it, they then lose 50% in value, who really loses? Not the FED, they have 500 billion more than they started with. It is the currency debasement that pays for all this bullshit.

    Undecided's picture

    doesn't the fed's charter expire this month?

    Seasmoke's picture

    that is what i have been wondering as well ??????

    Dr. Engali's picture

    The fed does not have a charter that end. I repeat the fed does not have a charter that ends. When the federal reserve was enacted it was a 20 year charter. In 1927 The original Charter was amended To read "To have succession after February 25, 1927, until dissolved by Act of Congress or until forfeiture of franchise for violation of law." This means the 20 years never ran out it should have ran out in 1933, this is due to the fact that the first two Federal banks of the United states ran out due to charters not being renewed.

    forwardho's picture

    until forfeiture of franchise for violation of law.

    So, is it still illegal to destroy U.S. currency.

    I was under the impression there was a law to that effect, no?

    Dr. Engali's picture

    Well we have seen the largest pillaging of wealth happen before our very eyes since 2008 and nobody held accountable, so my guess is that laws don't apply at this point in time... except for to you and me.

    Major Malfunction's picture

    Indeed.  One of Obama's PERSONAL Executive Orders (# 1337, code-named NANNY-NANNY-BOO-BOO) declares, "I'm rubber, and you're glue - what bounces off of me, will stick to you. Sooo ... sucks to be you, Bitchez!!"


    It is highly, highly unfortunate when basic words that form one's language inexplicably lose their meaning.  Like "law".  "Law" used to mean something. "Breaking the law" used to get a person in trouble.

    And the punch line?? This 'Obama' -- before becoming Chief Apologist of the USA -- was a practicing attorney and a University of Chicago Law School lecturer that taught constitutional law.  Boggles. The. Mind.


    Seer's picture

    Apparently you're a youngster.  This shit has been going on for a LONG time.  The Puppet Masters have existed since the hierarchical structure came to be...

    akarc's picture

    Let me see. 

    Im gonna make a product that has value and sell it. But then because it has so much value Im gonna buy 75% of it. Which makes me wonder? Why am I gonna sell the 75% I want back or don't want to sell to begin with.  Is this analgous to a product recall? Is my product defective? Am I just floating some sales to see if their is a market? 

    I'M SO FUCKING CONFUSED?????? I don't understand, it's non-sensical, I see your 75% and raise you Chinas holdings???  Help meeeeeeeeeeeeeeeeee Jesus........... wheres Kai and  his axe? Come on Toto we ain't in somewhere no more.

    Hedgetard55's picture

    You could buy your own product back if you could print your own money, otherwise you are correct, it is nonsensical. As it is, someone IS buying the crap treasuries and MBS, and it ain't the FED, it is the holders of dollars. They are the true buyers, through purchasing power debasement.

    Silverhog's picture

    So I want to know who the other 25% shitheads are. 

    Bansters-in-my- feces's picture

    Is that not a criminal act...?

    See...crime pays.

    youngman's picture

    I feel sorry for the idiots buying the other 25%...what the hell are they thinking

    Tsar Pointless's picture

    "Gee! So I'll buy this crap paper today, and then tomorrow, I'll flip it to my buddies at the Fed, who will buy it for a higher price, and I will be RICH RICH RICH!"

    That's what they're thinking.

    hairball48's picture

    Regarding the 25%... Sheeples think?

    Yen Cross's picture

     Unfortunately, I might still be around in 30 years when those ass wipes mature.

    Seasmoke's picture

    Hotel California.......All exits have been locked

    madcows's picture

    they stab it with their steely knives but they just can't kill the beast.

    Tsar Pointless's picture

    Trivia: The word "steely" was a reference to another classic '70s group, Steely Dan.

    For those who didn't already know.

    forwardho's picture


    The esoteric information available here at ZH is vast.


    Mr Pink's picture

    I actually did know that. Apparently the 2 bands didn't care much for one another. I myself always preferred Steely Dan

    Major Malfunction's picture

    More Trivia:  DID YOU KNOW?? Being fans of Beat Generation literature, Fagen and Becker named the band after "Steely Dan III from Yokohama", a strap-on dildo referred to in the William S. Burroughs novel Naked Lunch.

    Westcoastliberal's picture

    It's a snake eating it's own tail.  Can't last forever.

    forwardho's picture

    With infinite paper fiat one can purchase paper infinitely.


    madcows's picture

    Which leads to the question, What idiot(s) is buying the other 25%?