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As Of This Moment Ben Bernanke Own 30.5% Of The US Treasury Market... And Will Own All By 2018

Tyler Durden's picture




 

As is well-known by everyone, the Fed monetizes the US deficit on a daily basis, thanks to the 45 minutes of POMO love each day when it buys Treasuries from Dealers. Of course, the Fed monetizes bonds from across the entire curve (mostly the longer end), which is why it is somewhat complicated to express the amount of risk transfer the Fed takes on every time the S&P posts an uptick as a result of yet another bond purchase by the hedge fund with the largest fixed income portfolio in the history of the world. However, one simple way of expressing just this risk is through the use of ten year equivalents: Ten-year equivalents are the amount of 10-year notes that must be held by the Fed in order to remove the same amount of interest rate risk from the market as its current holdings. What this methodology allows is to represent the Fed's holdings of all marketable securities on a linear continuum, and represent the remainder, or those bonds held by the private sector, on the side.

So what may come as a surprise to most, is that as of this week's H.4.1 update, the amount of ten-year equivalents held by the Fed increased to $1.583 trillion from $1.576 trillion in the prior week, which reduces the amount available to the private sector to $3.637 trillion from $3.668 trillion in the prior week. And also, thanks to maturities, and purchase by the Fed from the secondary market, there were $5.219 trillion ten-year equivalents outstanding, down from $5.244 trillion in the prior week.

What this means simply is that as of this moment, the Fed has, in its possession, a record 30.32% of all outstanding ten year equivalents, or said in plain English: duration-adjusted government bonds. It also means that the amount of bonds left in the hands of the private sector has dropped to a record low 69.68% from 69.95% in the prior week.

America may or may not be becoming increasingly socialist and/or nationalized, but there is no doubt about it: its bond market most certainly is.

Chart of total ten year equivalents, broken down by Private sector and the Fed (courtesy of StoneMcCarthy):

The percentage of the entire US bond market currently owned by the Fed (courtesy of StoneMcCarthy):

 

Finally, the above means that with every passing week, the Fed's creeping takeover of the US bond market absorbs just under 0.3% of all TSY bonds outstanding: a pace which means the Fed will own 45% of all in 2014, 60% in 2015, 75% in 2016 and 90% or so by the end of 2017 (and ifthe US budget deficit is indeed contracting, these targets will be hit far sooner).

By the end of 2018 there would be no privately held US treasury paper.

Still think QE can go on for ever?

Actually, nevermind.  

P.S. as a bonus, here is a breakdown of the Fed's SOMA holdings by CUSIP


 

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Thu, 05/23/2013 - 21:41 | 3594381 nmewn
nmewn's picture

Good, we'll know who to prosecute.

Thu, 05/23/2013 - 21:47 | 3594400 HulkHogan
HulkHogan's picture

 "... a pace which means the Fed will own

45% of all in 2014,

60% in 2015,

75% in 2016 and

90% or so by the end of 2017." 

Thu, 05/23/2013 - 21:50 | 3594406 Zer0head
Zer0head's picture

Oh Canada and Toronto

The Rob Ford Crackpipe Truthers have mobilized. And they're sending me this link as proof of the conspiracy ....

 

(odd, is it not that the term "truthers" has become a pejorative?)

Thu, 05/23/2013 - 21:51 | 3594411 knukles
knukles's picture

100% by when?
Nope, not a chance.
If Benji and the Inkjets get anywhere close to owning much more, yields will drop so bloody low that idiots like the Krugster will be cumming in thier pants telling everybody how great the deficit situation is relieving the gubamint of the responsibility to even slow expenditures... thereby facilitating Infinite Creation of Treasury Securities to Create Digital Coin of the Realm.

No, it will not end that cleanly or easily, FFS

Thu, 05/23/2013 - 22:05 | 3594440 Manthong
Manthong's picture

I found this intriguing… it seems to present  some interesting levels of meaning..

Copper oxidizes a bit but does not rust.

http://www.youtube.com/watch?feature=player_detailpage&v=e0YFJvWmoes

Thu, 05/23/2013 - 22:07 | 3594456 idea_hamster
idea_hamster's picture

In that last chart, why does the years-to-maturity axis roll back from 29.3 to 12.7 at the far end?

Thu, 05/23/2013 - 22:10 | 3594469 max2205
max2205's picture

Who cares, what does it mater at this time...Hillary

Thu, 05/23/2013 - 22:25 | 3594531 disabledvet
disabledvet's picture

you're gonna get burned Tylers Durden. Knuckles is spot on on this. tax revenue is gonna come in big...we'll see about Obamacare but my view is that it's already been pretty much gutted to "make way for the annihilation of all other health care choices."

Fri, 05/24/2013 - 03:38 | 3595131 merizobeach
merizobeach's picture

"if the US budget deficit is indeed contracting"

I'm sorry, but you lost me there.  Over what medium- or long-term has that ever happened?  Since the beginning of Reagan's administration, with the exception of a couple years at the end of Clinton's, the budget deficit has achieved a new plateau with every four year term.  If Obama's second term does somehow bring a decline in average annual budget deficits from the first term, it would be an historical abberation, though I concede the possibility, as the average $1.5Tn deficits of the first term were also an abberation for their pace of increase over previous four years.  Still, I don't yet see any evidence to support the thesis that deficit spending will not, over the long-term, continue to progressively increase until its unsustainability results in collapse, not tapering, or any other such political measures of 'salvation'.  We're on Dr. Suess' Green Eggs and Ham train, and you can skip to the end of the book to see what happens to that train.

Fri, 05/24/2013 - 09:03 | 3595508 eclectic syncretist
eclectic syncretist's picture

The Fed monetizing bonds is a form of debt forgiveness to the Government, just like the Fed buying $40,000,000,000 in MBS every month is a form of debt forgiveness to the banks. 

Why do they exclusively get their debt forgiven, especially since they created the mess that has supposedly necessitated it?  It's because they are more equal than the rest of us, according to the Konstitution.

Thu, 05/23/2013 - 22:04 | 3594452 James_Cole
James_Cole's picture

" thereby facilitating Infinite Creation of Treasury Securities to Create Digital Coin of the Realm"

As long as the US military reigns supreme this doesn't seem to matter much, it'll just be a more extreme form of .gov as the pretenses have to dispensed with.

Thu, 05/23/2013 - 22:26 | 3594535 disabledvet
disabledvet's picture

oh and phucking with Special Operations Command past, present and future is not a wise health care option either.

Thu, 05/23/2013 - 22:32 | 3594549 asteroids
asteroids's picture

If everyone (wake up china) dumps their US paper the chairsatan would be forced to print up trillions to buy it. That would be fun!

Sun, 05/26/2013 - 20:17 | 3600328 daveO
daveO's picture

If their economy turns south, they'll dump Treausuries long before gold.

Fri, 05/24/2013 - 01:46 | 3595041 FreedomGuy
FreedomGuy's picture

So is the Fed the buyer of last resort or first resort, now?

At what percentage of debt do we remove the veil and just have the Chairman replace the President?

Thu, 05/23/2013 - 21:47 | 3594405 Skateboarder
Skateboarder's picture

That fool's flight ticket outta here has been GUA-RANT-EED, I'll tell ya that much.

Thu, 05/23/2013 - 21:55 | 3594422 nmewn
nmewn's picture

I have no doubt, along with his enablers.

But...the mortgages would be ripped up...law(s) can be changed very easily, with the proper cattle prodding...lol.

Thats the only thing holding the mask up...the law.

Thu, 05/23/2013 - 21:53 | 3594414 Charles Nelson ...
Charles Nelson Reilly's picture

The carpet-pissers did this?

Thu, 05/23/2013 - 23:19 | 3594711 azzhatter
azzhatter's picture

yeah, well that's like your opinion man

Thu, 05/23/2013 - 21:56 | 3594416 SRSrocco
SRSrocco's picture

You wonder just how long this INSANTIY can go on.  The last time I checked the TIC data, foreigners are still adding a bit to their Treasuries holdings.  They are almost forced to do it to keep their currencies from rising too much against the Dollar.

Anyhow, I posted this before, but I wanted to provide a link again for those who did not read...

THE BIG SQUEEZE CONTINUES IN THE GOLD MINERS

http://srsroccoreport.com/the-big-squeeze-continues-in-the-top-gold-mine...

The gold and silver miners are the REAL MONEY CREATORS in the world, not the parasite banks on Wall Street.

Fri, 05/24/2013 - 00:58 | 3594953 francis_sawyer
francis_sawyer's picture

Oh... I thought it was the 'bitcoin' miners

~~~

Doze dudes ah 'Wickit Smaht'...

Thu, 05/23/2013 - 22:00 | 3594437 PiltdownMan
PiltdownMan's picture

Bingo gringo!

Fri, 05/24/2013 - 00:01 | 3594812 Stuck on Zero
Stuck on Zero's picture

This is cool.  When the Fed owns 100% of the government debt we dissolve the Fed and everything is taken care of. No more debt.  Problem over.

 

Thu, 05/23/2013 - 21:42 | 3594382 AndrewJackson
AndrewJackson's picture

Duration adjusted 10 year equivalents? Please Tylers. It really is amazing the hedonics this site will come up with just to satisfy a bearish viewpoint on the world.

 

 

//endsarc

Thu, 05/23/2013 - 21:58 | 3594434 Spitzer
Spitzer's picture

 

Keep buying those treasuries ...

 

Thu, 05/23/2013 - 22:04 | 3594451 Chupacabra-322
Chupacabra-322's picture

Of course they will. And, they will re invest them the the Criminal Fraud Derivatives markets.

Thu, 05/23/2013 - 21:41 | 3594383 q99x2
q99x2's picture

There was no greater fool than Ben Bernanke during the decline of the UN empire.

Thu, 05/23/2013 - 21:41 | 3594384 Legolas
Legolas's picture

Why wait until 2018?  What's to stop them from accelerating the spending?

Thu, 05/23/2013 - 21:42 | 3594386 Cdad
Cdad's picture

Bond "market"....LOL!

Thu, 05/23/2013 - 21:46 | 3594395 Cognitive Dissonance
Cognitive Dissonance's picture

All your bonds are belong to us.

<And your little dog too.>

Thu, 05/23/2013 - 21:49 | 3594408 kliguy38
kliguy38's picture

I also would want yur sturdy blond women 

Thu, 05/23/2013 - 21:56 | 3594423 knukles
knukles's picture

And all the Ativan and Marinol that I can carry during the Supermarket and Pharmacy Sweep
Fine honey, go get the diet ice cream and laundry soap, I'm gonna look for some more Vicodin....  Hmmm, I wonder where he kept the Quaaludes?

its after 420 or 714 somewhere....

Thu, 05/23/2013 - 22:12 | 3594432 nmewn
nmewn's picture

Dats sexist!!!

Tyler!!! ;-)

/////////////

Damn...no sense of humor.

Thu, 05/23/2013 - 21:45 | 3594396 StarTedStackin'
StarTedStackin&#039;'s picture

I'm almost embarrassed to say that I hold Treasuries......but I have 40K in a 401b or 527a or somesuch nonsense through Fidelity.....I can't bail on them till I sign my retirement papers.....

 

 

Looking just to cash right out and pay the tax that I deferred.

Thu, 05/23/2013 - 23:27 | 3594730 Mrs. Haggy
Mrs. Haggy's picture

I don't think you can.  I'm in the same boat and would like to get out as well.  The only way I can cash out is if I have some sort of "life changing event".  It makes me wonder what percentage of the market is just a hostage like us.  What might happen if we were allowed to get out? 

Thu, 05/23/2013 - 21:45 | 3594397 Smegley Wanxalot
Smegley Wanxalot's picture

Someone buys this shit?

Thu, 05/23/2013 - 22:08 | 3594461 Buck Johnson
Buck Johnson's picture

Actually less and less people are buying this junk, the reason for the Fed to buy back it's debt. 

Thu, 05/23/2013 - 21:47 | 3594402 AccreditedEYE
AccreditedEYE's picture

By the end of 2018 there would be no privately held US treasury paper.

Whew!!! Thank God it's only 2013..... :)

Thu, 05/23/2013 - 22:01 | 3594438 Cognitive Dissonance
Cognitive Dissonance's picture

Tyler, can the Fed also purchase those special issue Treasuries that are held exclusively by the Social Security "Trust" fund?

Thu, 05/23/2013 - 21:47 | 3594404 Debt-Is-Not-Money
Debt-Is-Not-Money's picture

We should encourage them to buy it all.

After that happens the FED should be shut down and all the sovereign debts cancelled as they were created with non-existent "money" using the fraud of "fractional Reserve banking".

Then, the banksters responsible form creating and promulgating this fraud must be arrested, tried, convicted and hanged!

 

Thu, 05/23/2013 - 21:51 | 3594409 Skateboarder
Skateboarder's picture

Say hi to some sort of permission-granting national ID card, for starters.

EDIT: Ooh, ooh, with digital banking built in.

Fri, 05/24/2013 - 00:27 | 3594867 IamtheREALmario
IamtheREALmario's picture

And we will call it ... "Bitcoin".

Thu, 05/23/2013 - 21:51 | 3594412 Go Tribe
Go Tribe's picture

So the banks will own the U.S. government in 2018. Don't they already own it?

Thu, 05/23/2013 - 22:03 | 3594446 orangegeek
orangegeek's picture

Exactly.

Thu, 05/23/2013 - 21:56 | 3594429 Dr. Engali
Dr. Engali's picture

So we have to wait until 2018 to shut down he fed? Damn I was hoping it would implode this year.

Thu, 05/23/2013 - 22:02 | 3594442 Angus McHugepenis
Angus McHugepenis's picture

I have just taken complete ownership and control of the entire Cowbell industry. Even Bercracky will still need moar cowbell!

Thu, 05/23/2013 - 22:04 | 3594453 SWCroaker
SWCroaker's picture

Well crap.  If they own everything, does that mean we can all get jobs?   They'll be like, hiring, right?

Thu, 05/23/2013 - 22:06 | 3594455 Downtoolong
Downtoolong's picture

I think the point is that 100% ownership of the Treasury market by the Fed is entirely inconsistent with the dollar maintaining it's reserve currency status. You can't have both, which is why something very big has to break long before we even get there. At the current pace we're going there the long enough time line isn't very long.

 

Thu, 05/23/2013 - 22:08 | 3594463 Charles Nelson ...
Charles Nelson Reilly's picture

I wouldn't really worry too much about this, the fed knows what they're doing.

Signed,
99% of hedge fund & money managers

Thu, 05/23/2013 - 22:16 | 3594500 sumo
sumo's picture

After all, the Fed is full of Piled Higher & Deeper economists. What could go wrong?

Thu, 05/23/2013 - 22:12 | 3594478 Fuku Ben
Fuku Ben's picture

Under Article I, section 8, clause 11 when the FED is finally defined as enemy aliens and we've declare war on them we'll just confiscate it all back along with anything else they hold

Problem solved

 



Thu, 05/23/2013 - 23:22 | 3594714 bunnyswanson
bunnyswanson's picture

http://www.youtube.com/watch?v=wz9jL3YNX-0

Inbred creatures in castles rather than mountain valleys.  Probably to protect forturnes and secrets. 

Deliverance Dualing Banjos scene (on the porch)

Thu, 05/23/2013 - 22:14 | 3594483 spanish inquisition
spanish inquisition's picture

If the FED buys TIPS, does that meet the definition of irony?

Thu, 05/23/2013 - 22:16 | 3594494 radwon
radwon's picture

Wait for it.....

Wait for it....

Wait....

 

FUCK YOU BERNANKE.

Thu, 05/23/2013 - 22:21 | 3594516 Jim B
Jim B's picture

Two thumbs up!

Thu, 05/23/2013 - 22:29 | 3594540 eddiebe
eddiebe's picture

I think what this means ( Horror of horrors) that the banksters own and are in 1st position to be paid a huge portion of the US economic output. And accoriding to what I get is that by 2018 they will own all of it. 

Furthermore they can accelerate the process by raising interest rates. It won't cost them any more or less, because they can just print the money anyway. Do I have this about right?

Thu, 05/23/2013 - 22:43 | 3594596 are we there yet
are we there yet's picture

The FED also owns a lot of bad student debt, bad toxic mortgauge debt, fake treasury debt to self, vast future unfunded social security debt, ....... I see a pattern. Long term you should own things of value that can not be taxed or confiscated easily because paper and bank accounts will not be reliable.

Thu, 05/23/2013 - 23:02 | 3594658 Whoa Dammit
Whoa Dammit's picture

The way I see it is the Fed is the buyer of last resort for our governments debt (T-bills). They have had to buy it because, due to a combination of excessive QE and interest rates that are too low, no one else wants it. The Fed,and our government are now technically bankrupt, and if the trend continues, both will be functionally bankrupt.  

Thu, 05/23/2013 - 23:10 | 3594673 Nue
Nue's picture

I guess at this point Bernakes "Unwinding" strategy is to create another Central Bank to sell his positions off to because who the F#ck would be stupid/crazy enough to buy them from.......

 http://upload.wikimedia.org/wikipedia/commons/thumb/2/2f/Abe_Shinzo_2012_02.jpg/220px-Abe_Shinzo_2012_02.jpg

 

 

 

Never Mind........

Thu, 05/23/2013 - 23:11 | 3594680 Nue
Nue's picture

I see HTML tags do not work on Zero Hedge all that well whats the code for putting a picture in your post

Fri, 05/24/2013 - 10:24 | 3595765 roadhazard
roadhazard's picture

You have to know somebody.

Thu, 05/23/2013 - 23:09 | 3594674 proLiberty
proLiberty's picture

So, one branch of government bought up the debt issued by another branch of the government but with air-backed money? Sounds like the ultimate in boot-strap pull-ups.

Thu, 05/23/2013 - 23:23 | 3594719 Sutton
Sutton's picture

Wait 'til he turns his attention to coffee futures.

Fri, 05/24/2013 - 01:24 | 3595003 suckerfishzilla
suckerfishzilla's picture

I would rather that Uncle Ben hold the debt than to let Uncle Xi hold it. 

Fri, 05/24/2013 - 01:47 | 3595042 JamesBond
JamesBond's picture

... and then all your asses are belong to us

Fri, 05/24/2013 - 03:26 | 3595124 Peter K
Peter K's picture

"By the end of 2018 there would be no privately held US treasury paper." And man will have to revert to earning his daily bread by the sweat of his brow. :)

Fri, 05/24/2013 - 04:51 | 3595170 celticgold
celticgold's picture

and...be worthy of his hire....

Fri, 05/24/2013 - 05:52 | 3595200 Mario55
Mario55's picture

On one side it looks like the Fed has been injecting money to make up for the reduction of the shadow banking sector, on the other side with the massive Treasury purchases it has been withdrawing collateral from the market thereby twarting the repo market and the shadow banking sector....? 

Fri, 05/24/2013 - 07:55 | 3595323 Pumpkin
Pumpkin's picture

This appears to be part of the economic revilalization plan that I prefer.  Load the fed up with ALL the debt, and then simply kill it.  

Fri, 05/24/2013 - 09:07 | 3595522 Common_Cents22
Common_Cents22's picture

All your bonds are belong to us.

Fri, 05/24/2013 - 10:33 | 3595800 MFLTucson
MFLTucson's picture

Have no fear, soon your 401K will be loaded with this trash!

Mon, 05/27/2013 - 22:58 | 3602626 Joe_in_Indiana
Joe_in_Indiana's picture

He's leaving by the end of the year-will have to look for another person.

Mon, 05/27/2013 - 23:13 | 3602647 holdbuysell
holdbuysell's picture

"By the end of 2018 there would be no privately held US treasury paper."

Tyler, the Fed is owned by private interests. What can stop those private interests from and through their conduit Fed, when the debt becomes too encumbering on the people of the US who's labor is ultimately backing that debt, calling for a debt for equity swap and thereby owning all the US assets backed by the full faith of the US government, including the homes and other real assets the Fed has acquired through the debt of said real assets over the years?

 

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