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"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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Thu, 02/07/2013 - 17:38 | Link to Comment yogibear
yogibear's picture

LOL, wait until all those dollars come back.

Thu, 02/07/2013 - 18:06 | Link to Comment yogibear
yogibear's picture

Bernanke is that weirdo with only a trench coat that get's his jollies raping elderly savers.

Thu, 02/07/2013 - 18:14 | Link to Comment hairball48
hairball48's picture

All that shit on the Fed's balance sheet will never be sold. Those bonds have been checked into the "Hotel Bernank-a-Fornia"...and they can never leave.

Thu, 02/07/2013 - 18:16 | Link to Comment maskone909
maskone909's picture

just watched maria b and jim rogers talk about shorting bonds. not ONCE was there a single mention of INFLATION. it like any mention of the I word is forebidden! rogers went as far as to say " well maria, your on TV so you cant talk about the FED" hahaha its so painfully obvious whats happening here

Thu, 02/07/2013 - 18:32 | Link to Comment wingmann
wingmann's picture

The other25%> will be your forced pension purchases soon.

Thu, 02/07/2013 - 18:48 | Link to Comment goldenbuddha454
goldenbuddha454's picture

Would someone explain to the American people the FED can't buy squat because it has no money and no assets.  Its like saying my electric bill is due today, but I'm going to put it off until some point in the future when I have the money, say 30 years from now.  This 'buying' treasuries is just a bunch of foregoing payment of immediate debt so they try to find someone to buy the t-bills, some sucker like China, and the remaining 75% is just basically debt that will not get bought up or paid, EVER!

Thu, 02/07/2013 - 19:14 | Link to Comment goldenbuddha454
goldenbuddha454's picture

Why if we can't find anyone to buy 75% of our 30y treasuries is the percentage not 50 or 60% like Greece?  Why is it 1-3% yield?  Don't get that one.

Thu, 02/07/2013 - 19:21 | Link to Comment goldenbuddha454
goldenbuddha454's picture

Oh shit, there's a black helicopter over my f-in house!  Gotta go!

Thu, 02/07/2013 - 19:22 | Link to Comment yogibear
yogibear's picture

The Fed will drop the debt by devauling the currency  to a fraction of what it once was. The prices of things we by goes up instantly.

The wealthy clean up.

Instant poverty for all but the 1%.

Riot police, NSA Goons, military all control the crowds.

 

Thu, 02/07/2013 - 20:11 | Link to Comment Bunga Bunga
Bunga Bunga's picture

"Office of Debt Management" sounds a little bit hopeless, they should rename it into "Office of Wealth Management".

Thu, 02/07/2013 - 20:39 | Link to Comment medium giraffe
medium giraffe's picture

$16,510,890,000,000  (+/- $10,000,000)

 

That's not a real number, it's just an imaginary number.  How can a number so absurd, and so hard to actually conceptualise, let alone tackle, have any relevance to anything?  

So I suppose it really doesn't matter what they do anymore.  

Go on Benny do your worst, it's almost fucking irrelevant now....

Thu, 02/07/2013 - 20:42 | Link to Comment goldenbuddha454
goldenbuddha454's picture

Watching congress bicker over the budget sequester is hilarious.  They can't even find agreement on how to cut a measly 1.2 trillion after having spent 5 trillion in the last 4 years.  This country is so fucked!

Thu, 02/07/2013 - 21:04 | Link to Comment mt paul
mt paul's picture

 what is Poverty..

 

the name of a dancer

down the club ..

Thu, 02/07/2013 - 21:07 | Link to Comment dolph9
dolph9's picture

See, here's the thing...you guys thought this couldn't happen in Amerika, right?  

We are the land of the free, home of the brave...we're #1, we beat the Nazis and Communists, we gave Hollywood movies and McDonalds to the world, we will beat those evil Muslims and we will usher in peace and prosperity forever, for everyone on the planet, and we will be in charge.

But...now it is happening to us.  We are being turned into serfs.  And it's kind of depressing, isn't it?

Thu, 02/07/2013 - 21:14 | Link to Comment Me_Myself_and_I
Me_Myself_and_I's picture

Pushing on so much string its starting to resemble one nasty hairball.

Thu, 02/07/2013 - 22:09 | Link to Comment socalbeach
socalbeach's picture

A modest proposal.

"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."

The Fed buys 100% of all outstanding Treasury debt, none of this piddly $85b/month stuff (buying MBS increases bank reserves which can be used to buy Treasuries, as happened in QE1).

Then the Fed sells exactly 1 bill/bond of every duration.  That would set US government interest rates all the way out to 30 years at 0%, since there would be at least one person or entity in the world who would be willing to buy a Treasury at 0% interest (if there were no marketable Treasuries, the Treasury interest rate would be undefined).

Those actions would eliminate 99+% of the Federal debt, since as John Hussman said,

"A second approach is “monetization,” where the central bank creates currency and bank reserves in order to purchase and effectively retire government debt."

The result of these actions would be the US debt/GDP ratio being lowered to nearly zero, so the Fed could stop monetizing the debt (for a long while anyway).  And the Fed would actually sell holdings (1 bond for every duration).

I guess we would end up with a "slight" price inflation problem however.

Thu, 02/07/2013 - 22:14 | Link to Comment Seer
Seer's picture

I'll just give you that the existing debt could be vaporized, BUT... the govt and the people (public and private) STILL continue deficit spending day in day out.  Wipe out all (prior) debt and the money disappears.  The result is the same in both cases: no REAL money to purchase anything (especially anything imported), money velocity decays.

Thu, 02/07/2013 - 23:23 | Link to Comment socalbeach
socalbeach's picture

As the Fed buys additional government debt, then there would be an increase in the monetary base of the same amount.  The monetary base (currency plus bank reserves on deposit with the Fed) is the most basic form of money there is, so at least that measure of the money supply wouldn't decrease.

Other measures of the money supply, like M1, wouldn't have to increase by the same amount however.  That's because only money held by the non-bank public is counted in M1.  So if the Fed were to buy Treasuries from banks, that purchase wouldn't add to M1, at least initially.

I'd be interested in hearing why you think that M1, M2, or MZM, etc., would actually decrease as the Fed buys up Treasuries.  It hasn't worked out that way over the last several years (offset added to monetary base and adjusted M1),

St Louis Fed graph: various money supply measures and bank credit

(I wonder why M2 and MZM have dropped a little recently?  Maybe the banks have been unloading some of their equity holding onto the public.)

Thu, 02/07/2013 - 22:54 | Link to Comment Youri Carma
Youri Carma's picture

"The Fed has been the biggest buyer of U.S bonds, flooding the economy with more than $2.3 trillion through three rounds of purchases since the depths of the financial crisis in 2008.

It’s now the biggest owner of Treasuries, with $1.66 trillion as of this month, ahead of China’s $1.16 trillion.

Purchases by the Fed will effectively absorb about 90% of net new dollar-denominated fixed-income assets, according to JPMorgan."

Source: http://www.bloomberg.com/news/2012-12-24/dealers-tighten-treasuries-grip-as-fed-qe3-suppresses-correct-.html

Fri, 02/08/2013 - 00:17 | Link to Comment hedgehog9999
hedgehog9999's picture

Typical banana republic methods sans the bananas.

At the height of the Peso crisis in the early 90's a $20B bailout was put in motion to rescue the country from the abyss. They were printing every bit of the Mexican budget deficit which was out of control kind of like the Obama  budget which does not exist. They are hopeless as there is no uncle Sam to rescue them

Fri, 02/08/2013 - 01:39 | Link to Comment zdk45
zdk45's picture

As much as it feels great to call our saviors Ben and Tim total morons, it isn't accurate.  They aren't ignorant. The very sad thing, so to speak, is that they know exactly what the end game is. And the worst salt in the wound, people with anything left of integrity still try groping for reason, when they are no more than rats in a cage --- Laughed at by the puppet masters,,,,"LOL, look at 'em,,,,trying to make reason....LOL....we pull all the strings at random...look at 'em!!!" 

 

round and round on the wheel...

 

the only call is/was/always will be, until it isn't....Long Fraud.  What a foundation to build a country on...even evil, when no one is looking, has to be sickened by it all.

Fri, 02/08/2013 - 01:45 | Link to Comment zdk45
zdk45's picture

duplicate post apologies. going back to yahoo comments...my bad

Fri, 02/08/2013 - 01:39 | Link to Comment zdk45
zdk45's picture

As much as it feels great to call our saviors Ben and Tim total morons, it isn't accurate.  They aren't ignorant. The very sad thing, so to speak, is that they know exactly what the end game is. And the worst salt in the wound, people with anything left of integrity still try groping for reason, when they are no more than rats in a cage --- Laughed at by the puppet masters,,,,"LOL, look at 'em,,,,trying to make reason....LOL....we pull all the strings at random...look at 'em!!!" 

 

round and round on the wheel...

 

the only call is/was/always will be, until it isn't....Long Fraud.  What a foundation to build a country on...even evil, when no one is looking, has to be sickened by it all.

Fri, 02/08/2013 - 01:54 | Link to Comment edifice
edifice's picture

Office of Debt Management... pffffft...

Do NOT follow this link or you will be banned from the site!