RBS: "The Fed Is Now Responsible For Monetizing A Record 70% Of All Net Bond Supply"

Tyler Durden's picture

The following statement and chart from the RBS' Drew Brick pretty much explains it all: "QE has seen the Fed extend its dominion on the US curve away from the short-end and into longer duration paper is patent, too. On a rolling six-month average, in fact, the Fed is now responsible for monetizing a record 70% of all net supply measured in 10y equivalents. This represents a reliance on the Fed that is greater than ever before in history!"

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Cdad's picture

Banana Tree Republic Ben Bernanke.

SilverIsKing's picture

Gold needs to drop another $100 to reflect the absurdity.

Say What Again's picture

All this as the $SPX soars to new highs.  The UP Vol as a perc of TOT Vol is over 70%  The VIX is near record lows.  I don't see ANY problems!!!



Pladizow's picture

And the world should believe that the Fed has an exit strategy?

How can they not increase purchases?

How can they decrease purchases?

How can they stop purchases?

How can they sell?


Stoploss's picture

Maybe they can understand this:

It's QE forever, or, it's over.



wintermute's picture

This isn't "reliance on the Fed", this is reliance on depreciating the value of every dollar in every pocket: worldwide. A global stealth tax to keep the USG afloat.


NotApplicable's picture

So... it looks like it's time to raise the Fed's 'debt ceiling' a few more percentage points, lest they run into legal troubles.

aVileRat's picture

Since gold is one of the last 'A' asset left in the world of collateral, of course it is going to go zero bid, because it is a net-seller market right now at the 10B+ level of fund flows. There is zero reason to hold paper gold when your vault cash cost is higher than the spread. You make better spread returns on the Twitter/Appl debt spread.

The other problem is gold, like used cars is a giffen good but only if it can compete against its own supply stocks. No growth in demand, no demand for equity golds, so no paper growth in gold. So the curve is then sharply kinked downwards.

Waiting for the Peter Munk 'fuck you' speech on his way out. The gold asset class may snap awake when 30% of all future mined gold post 2020 will be permantly on sellers strike.

Note, the Canada takeover clauses are very vague around gold companies listed on the TSX but holding global assets. With no JV's limiters on canadian content in multinational projects.


rubiconsolutions's picture

I'm issuing bonds to pay for my kids college education as well as my post graduate degree in yachting. Do you think the Fed will buy those bonds too?

Groundhog Day's picture

In a debt ponzi scheme, debt MUST be increased no matter what or the game is up.  So you start with a few wars, then expand to Tech stocks, expand to housing, expand to subprime housing, expand to student loans, expand to subprime auto loans not to mention the SS expansion, medicare expansion, obamacare expansion.......

So to answer your question, they will eventually get to your bonds, be patient

Debt=money and money=Debt

ZeroBoBo's picture

"Shhh! Don't mind the man behind the curtain."
- the 0.001%

Dollar Bill Hiccup's picture

The beauty of leverage! Why not? Not a beautiful de-leveraging, but a beautiful re-leveraging. Sorry Ray.

I am a Man I am Forty's picture

The only thing I've ever heard Dalio say that was completely fucking stupid.

odatruf's picture

Exctly, if there is no consequence to 70%, why not buy every bond at zero interest?  Together with this insanity, there is no limit to what we can acomplish.


odatruf's picture

Hmm, a downvote.  Clearly the right level is between 200 and 300%.  Glad that is settled.


fooshorter's picture

I lol'd. Almost as hard as helicopter ben does when we wakes up in the morning.

Cdad's picture

Surely, you jest.  If you were to do that, someone might figure out that there is absolutely no bond market left anymore.  Just a giant policy tool in its place.  And we can't have people coming to that understanding, now can we? 

Dr. Engali's picture

It's coming. Just wait.

hedgeless_horseman's picture



A moment of silence for the bond vigilantes; drowned in a sea of liquidity.

akak's picture

Bond vigilantes, or "floating" fiat currencies?


PS:  I have always thought it was amusing that fiat currencies are considered to "float" against one another, as in fact they invariably do nothing more than sink against one another.  Just another brick in the Orwellian wall of propaganda by TPTB, like ALL US military spending and military action, no matter how aggressive or unprovoked, being automatically labeled as "defense".

hedgeless_horseman's picture



...they invariably do nothing more than sink against one another.

Nor is it really a "race to the bottom," but rather more like synchronized diving.

Germany, like Japan, are post-war pawns. Their currencies are DESIGNED to be debased, as and when needed, to achieve synchronized diving with the pound and dollar.

No strong currency left behind.

LawsofPhysics's picture

Indeed.  The only question that remains is whether or not the East will care if The Fed monetizes 100% of the issuance and whether or not these Eastern countries will actually do something in response.

astoriajoe's picture

I wonder if this guy's name was brought up for replacing the Bernank instead of Yellen:


max2205's picture

Funny has everyone forgot what savings are for?

The word is extinct ....remove it from your google search (aka dictionary)

Theta_Burn's picture

What no other takers of this fine script?

Maybe they can start a worldwide ad campaign featuring BroBonds or maybe even HoBonds, because its foolishness not to be holding your non-yielding bonds...

Temporalist's picture

“The Federal Reserve will not monetize the debt.” - Ben Bernanke 06/03/09

odatruf's picture

In Soviet Amerika, the debt will monitize you!

Seasmoke's picture

Serious. What would happen if they were 0%…………………

odatruf's picture

The coupon payment (ie the interest rate paid)?  If we are talking about a rational system... try to imagine all life as you know it stopping instantaneously and every molecule in your body exploding at the speed of light.


In fantasy Amerika circa 2013, meh. Not so much I'd think.

fooshorter's picture

We dont need no stinkin Central Bank!


- The constitution.


Its all paper anyway. Gold is money.

jvetter713's picture

What's the over/under for 100%?  Q3 2014 perhaps?

NoTTD's picture

If we can get this up to 100%, we'll simultaneously reach Nirvana (Not the band.).

buzzsaw99's picture

go fuk yerself RBS

ronincap's picture

Not RBS fault - Fuk the fed and the US gvt


buzzsaw99's picture

yeah right, RBS isn't part of the problem. the fuck they aren't. without the fed, uk taxpayers, and the boe they'd be sucking the devil's dick in hell right now.

buzzsaw99's picture

from wiki: The bonus payments paid to RBS staff subsequent to the 2008 United Kingdom bank rescue package have led to controversy.[24] Staff bonuses were nearly £1 billion in 2010, even though RBS reported losses of £1.1 billion for 2010. More than 100 senior bank executives were paid in excess of £1 million each in bonuses.[25] Consequently, former CEO Fred Goodwin was stripped of his knighthood in mid-January, and newly appointed CEO Stephen Hester renounced his £1 million bonus after complaints over the bank’s performance.[26] 82 percent of RBS' shares are now owned by the UK government, which bought RBS stock for £42 billion, representing 50 pence per share. In 2011, the shares were worth 19 pence, representing a taxpayer book loss of £26 billion.

ronincap's picture

US pay 415billion in annual interest payments baby !!!!!  yeah thats the way to prosperity - only one way to go  MORE TAXES

pods's picture

They are mopping up 70% and the 10 year is heading back up towards 3%?

This one will be good when they try and taper.  

They are in the coffin corner and are running low on gas.  Sucks to be them.

Between SS, medicare, the Obamacare debacle (tax revenue) and refinancing @ higher rates I think the Fat Lady is warming up.


css1971's picture

LOL. Just think of the implosion when they stop.

Bonds falling? What do you do to get out of bonds?

NEOSERF's picture

Exactly how is this different than Japan where the silly citizens hold the JGBs vs. here where the Treasury holds them?  Bottom line is any increase in rates and I think the appropriate word is "decimation".

LawsofPhysics's picture

The Fed is a private bank.  The difference is that the citizens in the U.S. are paying a PRIVATE bank interest on the debt, instead of interest going back into the treasury and the future  of generations to come.


orangegeek's picture

The planet is calling bullshit on all of this.


And when it hits the fan, I wouldn't want to be Ben nor a relative of his.

No Euros please we&#039;re British's picture

Don't worry, all those bonds will be nice and safe in your pension fund before they explode.

Saucy-Jack's picture

Waiting for them to announce a cryptocurrency called FedCoin....

Zadok's picture

Follow-on to triple agent twice flipped CIA bitcoin?