Chart Of The Day: The Fed Now Owns One Third Of The Entire US Bond Market

Tyler Durden's picture

The most important chart that nobody at the Fed seems to pay any attention to, and certainly none of the economists who urge the Fed to accelerate its monetization of Treasury paper, is shown below: it shows the Fed's total holdings of the entire bond market expressed in 10 Year equivalents (because as a reminder to the Krugmans and Bullards of the world a 3 Year is not the same as a 30 Year). As we, and the TBAC, have been pounding the table over the past year (here, here and here as a sample), the amount of securities that the Fed can absorb without crushing the liquidity in the "deepest" bond market in the world is rapidly declining, and specifically now that the Fed has refused to taper, it is absorbing over 0.3% of all Ten Year Equivalents, also known as "High Quality Collateral", from the private sector every week. The total number as per the most recent weekly update is now a whopping 33.18%, up from 32.85% the week before. Or, said otherwise, the Fed now owns a third of the entire US bond market.

At this pace, assuming Janet Yellen keeps delaying the taper again and again over fears of how "tighter" financial conditions would get, even as gross US bond issuance declines in line with the decline in deficit funding needs, the Fed will own just shy of half the entire bond market on December 31, 2014... and all of it some time in 2018.

Source: Stone McCarthy

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fonestar's picture

But the dummies on this site still like that bank's paper.

Pladizow's picture

Soooooo, how do you exit a market when you are the market?

NoDebt's picture

Ask Jamie Dimon.  It's a bit expensive.  Good thing the Fed can self-recapitalize or they might have a tough time of it.

hedgeless_horseman's picture



That chart looks like China's gold holdings.

NoDebt's picture

Yeah, but China can't print more gold.  We can always print more Treasury debt.

nope-1004's picture

The headline on the inter-office emails among the FOMC members reads a bit different.  Goes something like this:  "Fed still doesn't own 67% of all outstanding bonds."

Ones perception is ones reality.

This won't end well.


Occident Mortal's picture

Anyone else think Bruno Iksil's IG9 episode was a kind of Gemini Project for the taper?

The deficit is expected to contract significantly over the next 18 months.

The further the Fed goes into USG the more everyone will prepare to short.

zaphod's picture


This simply means that the US Gov has not issued enough debt. This is an easily solvable problem.

Winston Churchill's picture

Not to worry, the PBOC has a plan to change that shortage of US govt. debt.

Plenty of demand caused by not rolling debt over as it falls due.

How long until the 'market' catches on ?

MillionDollarBogus_'s picture

In Rome, the Pope takes a swipe at trickle down economics...

"...In this context, some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting..."

Frankie, they are waiting in line at WallyWorld..


Occident Mortal's picture

Trickle down economics does not work because by the time the money reaches the poor it has changed hands several times and the ensuing inflation neutralises the new purchasing power before it gets very far down the chain.

Manthong's picture

Well, I just got a couple of gold fillings (really).

One of these days I will be worth more than a third of the bond market.

I am more equal than others's picture



My rich fantasy life:

Selectively default on the third that is owned by da goberment.  Justice sues Treasury.  Then Treasury turns the IRS on each Justice appointee and employee.  Invite Hulk Hogan to host the event.  Buy popcorn and sit back and enjoy.  Theater for everyone - drama, comedy, tragedy.

Herd Redirection Committee's picture

The first spend of newly created money is always the sweetest.  Hence the popularity of the scam.

Yen Cross's picture

  I can't believe MDB posted that comment. I'm completely flabberghasted! Did you just just get out of the Kool-Aid rehab. for Krugmanomic addiction?

akak's picture

Look more closely at the name: "MillionDollarBogus", NOT "MillionDollarBonus".

NoDebt's picture

Yeah- MillionDollarBOGUS is the real deal.  MillionDollarBonus is the bullshitter.

I still can't imagine why Bogus keeps his screen name.  That's gotta get old pretty quick.

OneTinSoldier66's picture

Take a closer look at that nick.

Yen Cross's picture

  Thanks fellas. I was caught up in the "rational exuberance" of a down day in the markets.

Herd Redirection Committee's picture

I think everyone reading the comment did a double-take.

booboo's picture

This Pope is a certifiable retard statist who wouldn't know a free market economy from a virgin, runs a empire worth billions of looted nazi gold and probably only job he ever had was trading Father Goodknob blow jobs for hersey bars.

fxrxexexdxoxmx's picture

But he does not read the Koran so he has got that going for him.

LawsofPhysics's picture

Indeed.  Even though the deficit is decreasing, the liabilities and interest must still be funded and serviced.  Good luck to a disfunctional CONgress in that effort when rates return to their historical averages.  Will not happen, the Fed will buy 100%, then 150%, then 300% etc. etc.

Nothing changes until the supply line break in earnest.  My guess is that by that time a family of four with a annual income of $500,000 will be eligible for SNAP.  Go find a survivor of the great depression and let them know that a family of four with a $50,000 income is now eligible for SNAP.  Math is a bitch, "this will not end well" is an understatement.

Occident Mortal's picture

The cost of servicing the debt is the same as it was in 2006/2007 even though the national debt has ballooned from $8trillion to $17trillion.

When rates tick up, the deficit will gape forcing the Fed to continue QE.

The snake will eat its tail. And when people realise that the Fed has lost control it will all collapse.

LawsofPhysics's picture

Steady as she goes....

(productive physical assets, cash/coin, and a dependable tribe...)

WWIII is already underway, the shooting simply has not started yet.

WillyGroper's picture

Productive physical assets?

Would this qualify?

Times are tough.

Diogenes's picture

They lost control years ago. Or rather, they passed the point of no return.

disabledvet's picture

"no good deed goes unpunished." the Government must first blame itself for what happened in 2008 (monetize the debt, pray the dollar doesn't collapse, double top the commodity bubble and rake in the dough on the MBS's through Fannie and Fred...check) then raise taxes (check) then deny the benefit ( to speak.) As Clint Eastwood famously said "NOW we dance." yes...the spread is widening...close to the widest in US financial history actually...but the point of "effecting" that is for the spread to start paying for the my view. there's suppose to be a ton of inflation by my calculation(s) now...or at least a mild inflation that is containable at a certain level...yet interest rates never responded "rationally" to my thesis...while every other asset class sure did. So i took a flier after compounding 30% for four years..."in wonderment" i guess (or just plain curiosity.) Did the Fed disabuse me of my notion that "they really want that gap to be the widest ever"? Nope. In feel like the financial equivalent of "Worf" on Star Trek..."the Next Generation" this year. Just..."out of place" on the Bridge... but still on the Bridge for some reason.

Oracle of Kypseli's picture

The O'bummer's are taking  fewer trips overseas

Antifaschistische's picture

Forget the Fed buying for a minute. Who's selling and why?

They're selling because the Fed is clearly paying above (otherwise) market rates. That makes sense. So, the sellers aren't putting their money back into Treasuries. It's going into other asset classes. So, the Fed's action is really pumping the stock market. They way I see it, the Fed won't stop buying Treasuries until the insiders are well prepared to profit from their short positions in the secondary asset classes. 

But the insiders will know exactly when that will happen or won't they get it going both ways.   All the chatter from the Fed about considering to taper is just window dressing to keep the 99.9% thinking they're actually considering it, while the .01% continue to profit off their treasury liquidation and secondary asset class appreciations.

hedgeless_horseman's picture



Who's selling and why?

United States Treasury Secretary, Jacob Joseph "Jack" Lew, the middle guy in this photo, is the one selling all those treasuries to The Fed, mostly because of deficit spending.

A Jew borrowing all of that money, from a bank controlled by other jews.  I wonder what Jehovah thinks of this.

Deuteronomy 23:19-20 ESV

You shall not charge interest on loans to your brother, interest on money, interest on food, interest on anything that is lent for interest. You may charge a foreigner interest, but you may not charge your brother interest, that the Lord your God may bless you in all that you undertake in the land that you are entering to take possession of it.

"Give me control of a nation's money and I care not who makes it's laws"
— Mayer Amschel Bauer Rothschild

Almost Solvent's picture

Look out before they Francis Sawyer your ass - although they did give you the ability to post pictures, so maybe you are juiced in. 

Ralph Spoilsport's picture

h_h, the entire argument between you and VD has been deleted apparently. Along with other choice comments from Bay of Pigs and others. Just a heads up.

Headbanger's picture

That's easy!  You clone your self, sell to the other you, repeat ad infinitum and ad nauseam

Martial's picture

"At this pace, assuming Janet Yellen keeps delaying the taper"....

...forget the taper, what happens when she DOUBLES QE? FED owns ALL treasury market by 2015?

SDShack's picture

Actually, they only need to own 51% to effectively control the bond market. Their end game is much closer than most people realize.

max2205's picture

If the fed increases qe...the up 15% open will be the will be an epic reversal

eclectic syncretist's picture

which would essentially mean it no longer exists


Fukushima Sam's picture

"Soooooo, how do you exit a market when you are the market?"

It's like a financial version of "the stranger".  Sit on your left hand until it goes numb, then have your right hand sell while your left hand buys. 

It's just like you're selling to someone else!

NEOSERF's picture

And without "allowing" the rate to rise which kills off your exit strategy?  Insanity, this will take 5 years to taper to stop the growth and then what??..Does the Fed hold to maturity??  I guess so.  But without them sopping up everything no one else really wants, you have to create a crisis elsewhere so that these bonds look REALLY REALLY good and creates "flight to safety" to sop up demand

Charles Nelson Reilly's picture

Nah, I'm off paper... I take pennies now and laser print the bitcoin emblem onto them.  Shit is going to da moon, brah!

InspectorBird's picture

not that i know of... but i heard some fools are falling for even crazier scam, invisible coins.

fonestar's picture

Pretty much everything that exists is invisible.  What is your point?  That human's five senses are limited and so you should limit yourself to them?

InspectorBird's picture

i bet bitcoin creators are laughing their asses off when they read your comments :) the grin on their faces must be priceless. I mean to run a scam and transfer wealth and at the same time having victims adore, praise and idolize you, that must be the whole new level of thievery.

RmcAZ's picture

Warren Buffett level trolling

fonestar's picture

Actually my OP had nothing to do with Bitcoin.  I was just mentioning the general observation that most stackers continue to drive up dollars, passively transact in dollars and are very much their own worst enemy.