Fed "Tightens", Tapers $10 Billion - Full Redline

Tyler Durden's picture

Despite the world of mainstream media pundits proclaiming the US is recovering nicely and that a taper is priced in (and the warning that the 5Y auction gave this morning that it's not), markets are already reacting violently to the Fed's decision to announce a small 'taper' (and more dovish forward guidance)...


We now leave it to Ben and his final press conference to explain his decision... and, of course, make sure everyone remembers "QE is for Main Street", 'tapering is not tightening' (despite Jim Bullard telling us it is), and just how effective 'forward guidance' is.

Pre-FOMC: S&P Fut 1771 (spiked pre-FOMC), 5Y 1.55%, 10Y 2.875%, VIX 16.5%, Gold $1236 (which was spiking pre-FOMC), EUR 1.376

As a reminder, here are the 4 reasons why the Fed was cornered into tapering... as we have noted numerous times before; the "taper" is all about economic cover for a forced move the Fed has to make:

1. Deficits are shrinking and the Fed has less and less room for its buying


2. Under the surface, various non-mainstream technicalities are breaking in the markets due to the size of the Fed's position (repo markets, bond specialness, and fail-to-delivers among them).


3. Sentiment is critical; if the public starts to believe (as Kyle Bass warned) that the central bank is monetizing the government's debt (which it clearly is), then the game accelerates away from them very quickly - and we suspect they fear we are close to that tipping point


4. The rest of the world is not happy. As Canada just noted, the US monetary policy will be discussed at the G-20

Simply put, they were cornered and needed to Taper sooner rather later...


and as Jim Bullard previously noted,


Financial market reaction to the June and September FOMC meetings provides sharp evidence that changes in the expected pace of asset purchases have conventional monetary policy effects.


Using the pace of purchases as the policy instrument is just as effective as normal monetary policy actions would be in normal times”


Or - in other words:

Tapering Is Tightening


And as BAML noted previously, forward guidance is ineffective as,

...policy makers are finding it harder to convince markets that central bankers have more insight into the future course of the economy and policy than they actually do. Meanwhile, markets are learning that it can be painful to rely too heavily on forward guidance when the risk/reward of being long fixed income is asymmetrical when close to the zero lower bound.

Full Statement redline below:

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AllThatGlitters's picture

Gold and Silver Popped before, now dropping.  Where does it finish?

Live Gold: http://www.pmbull.com/gold-price/

Live Silver: http://www.pmbull.com/silver-price/


Headbanger's picture

Those pussies! 

And to all of you "no taper" mooks....

Told you so!!

camaro68ss's picture

Cover for the bernake so he can say he left on "good terms"

Deo vindice's picture

Only in a crazy and bizarre world can one cut spending by 10 billion yet still spend 75 BILLION a month and people think that is fiscally prudent and/or conservative?

It is still 75 billion a month!!

LawsofPhysics's picture

Exactly, but who knows what the printing really is or where it is going.  Please, show me an audit, oh, that's right, the Fed has never been audited...


More importantly, existing debt still needs to be serviced and the future liabilities/budget still needs to be funded...

tick tock motherfuckers...

Pladizow's picture

Doest he $10bil taper come from MBS, Treasuries, or both?

If both, in what %?

Popo's picture

Bah.  I'll believe it when I see it.   Let's be clear:  The Fed said they would START tapering in January.  When in January?  The 31st?   So maybe more than a month away?   A lot can happen in 6 weeks.  This is most definitely not "Taper on".   

It's "We promise to go 'taper on' sometime in the next 6 weeks.   Between now and that date we will have another meeting... with a new and more dovish Fed chief".

IMHO there are a lot of people here swallowing this bs who should know better.

MachoMan's picture

We all know they have to keep their foot in the gas...  so, front running causes diminishing returns at an accelerated pace.  The cure to prolonging the status quo?  Throw off the front runners every now and again...  In other words, introduce ambiguity to the mix to keep the market honest.  This is all that is happening.  In other words, even if they taper today, they may not tomorrow and the expectation is that they'll have to increase the printing at some future date...  again, timing decisions are fool's errands.

mayhem_korner's picture



Absolutely.  This is all a misdirection.  At $75 B/month, the Fed is still more than monetizing enough to soak up all of the bonds needed to float the federal govt's (non-GAAP) operating deficit.  No one is going to even be able to sort things out until after the Super Bowl anyway because the govt is going to release skewed holiday season retail sales, then obfuscate further with the January seasonal lump-sum adjustment to employment numbers.

Wake me up when the bond-buying drops below the monthly pace of deficit generation AND the 10Y yield stops rising.  Until then, this is nothing but Swan Song for Bentastic.

trader1's picture

that's because the press releases and press conferences are targeted to ensure understanding by all audiences, including people who can't work with decimal points.  

Manthong's picture

Scottie..  Full Reverse!!!!!

“Cappen.. I’m givin‘ her all that we got..

I canna’ do no moar!”

Pseudonymous's picture

Dectaper - ducttaper. There, I fixed it.

I think what the FED is trying to achieve is simply to try to train the people to believe that the amount of QE is the new FED funds rate. That is, from now on, forget about the interest rate, now the central thing about their policy is the monthly rate of QE, which is to be manipulated up and down. And the mere assertion of "power" - that this tool of theirs is almighty and super influential over everything monetary - is their goal. What the actual effect on the economy is is not that important for them. It's about who is wearing the pants in the family.

Enough with trying to read sick people's minds now. At the end of the day it's all just a farce that does not deserve too much attention.

bunzbunzbunz's picture

Bitcoin is down, so free payouts of bitcoins are up at http://freebitco.in/?r=25727

BigJim's picture

Isn't it amazing that all these figures are round numbers? That the economy does not 'need' $74.3 b/month, but exactly $75b?

If I didn't know better... I'd say it's almost as if they're plucking these figures out of their collective ass.

Manthong's picture

All they need is a lousy $ 73,994,229,133 dollars and 39 cents per month.. I did the math.

Pseudonymous's picture

That is because, apparently, you haven't seen that other South Park scene... http://www.youtube.com/watch?v=5Z6BNpSzMK0&t=14m54s

CounterPartyVice's picture

Tapering you say? Let's buy more treasuries right now! TLT+0.85%

ejmoosa's picture

Hell yes!  Thank you Fed for leaving some of that paper for the rest of us!

fonestar's picture

So do any of you posses the ability to find out what the Fed is saying and then what the Fed is actually doing?  No.  Remember those secret bailouts that were only disclosed two years after the fact?  Maybe you only care about the Fed because you want your guy to takeover and unleash some new scam upon the world?  You still love those little green rectangles but thankfully they will be reduced to shit-paper by the time your guy gets to have a go at it. 

disabledvet's picture


eclectic syncretist's picture

"fonestar phone-star 69 call back broker say SELL BITCHCON ALL THE WAY TO ZERO dumbass"

- as seen on http://www.engrish.com/


fxrxexexdxoxmx's picture

What does any of this information have to do with Bitcoin? That rascal Ben did not mention Bitcoin once.

//// 1st Bitcoin mention on this thread/////

fonestar's picture

Where did I mention Bitcoin?  I am not talking about Bitcoin, I am talking about fake libertarians who believe their funny-money is going to rise from the grave.

bigrooster's picture


Do you enjoy being a dick all of the time?  How are those BTC's working out for you big guy?

fonestar's picture

They're working out great!

(and I am a permadick)

Yes We Can. But Lets Not.'s picture

longer than four hours is cause for concern

PRO.223's picture

This is so Bernanke can say "everything was going so well when I was leaving that we started to taper". It's just him trying to set up his own legacy as not being the failure it is.

Four chan's picture

"Doest he $10bil taper come from MBS, Treasuries, or both?

If both, in what %?"

the question we know the answer to, that they will never answer.

MillionDollarAnus's picture

Why are so many people ignorant of the fact that the Federal Reserve has indeed been audited back in 2011?  Here's the audit.


LawsofPhysics's picture

That was only for the "loans outstanding" and not the entire balance sheet.  Of course all those financial firms paid back those loans, you knew they would.  Troll.

MillionDollarAnus's picture

It doesn't matter.  One part of the Federal Reserve being audited does not equate to "The Fed has never been audited"  You could've said the Federal Reserve has never had a full audit and then been technically correct (as far as we know). 

It says right in the audit that the loans were paid back, that isn't the issue.  The shadier part of the audit (imo) was that some banks required trillion dollar emergency loans to function.  Without a central bank to rely on our entire financial system would've collapsed. 

Yes it would be even more interesting to see a full audit but it's likely the majority of people viewing it would not understand it anyways.  I may be a jerk but I'm certainly not a troll and what's up with people using all kinds of words incorrectly?  I hear people use the word tool inaccurately so, so, so often. 

ejmoosa's picture

So, for the last twelve months ending Jan 2014, QE would total 1.01 trillion versus 1.02 trillion....

Got it!

ejmoosa's picture

Just one question:  If job growth this year is less than last year, how is that a strengthening labor market?


GubbermintWorker's picture

Good news though. The Congress will pass a tightened budget that will whack out a whole 25billion dollars......over.....ten years. </sarcasm>

James_Cole's picture

Schiff explaining how he is still correct in 3...2...

LawsofPhysics's picture

Still buying 75 billion, so technically 75/85=0.88 x 100 = 88%, so Peter is still 88% correct.

What do you think the fed will do when the existing debt cannot be serviced or the future liabilities/budget cannot be funded?  Are you going to buy all that government paper?

camaro68ss's picture

88% of the time hes right every time

eclectic syncretist's picture

Bernanke you little bitch, you better get down there in the basement with Yellin and start manning those printing presses like a couple of six year olds in a Seoul sweat shop, you greased up pivot man at the bankster circle jerk asshole!!!!!

eclectic syncretist's picture

Now you can go out saying your job was done and everything was coming up roses when you left, Bernanke, you worthless piece of maggot shit.

James_Cole's picture

Charlatan Schiff has made a huge deal about being right on 'no taper.'

Just like other dumbasses (cough jim sinclair) you can go a long way on a 50/50 call.. but being wrong is inevitable. 

Not that any of the dumbasses who follow schiff care. 


In investing commentary the only thing that really matters is getting timing. 

philosophers bone's picture

You are calling Schiff a "dumbass"!!  LOL.  It's never been about cutting it by $10 billion here or there.  His stated position is nuanced - that the Fed won't taper or, if they do taper, it will be just a slight reduction but they'll never stop QE.  He's still right.

RSloane's picture

Forget it. Its James Cole. He interprets his universe on whether or not Schiff was right or wrong according to what he thinks Schiff said about tapering.

James_Cole's picture

Nuanced?? The man is certainly not nuanced. 

Yeah, sure, he's given himself an out on tapering. But he's been playing up the 'no taper' for a while now, his followers on here going off at Tyler because Tylers argument has said an inevitable taper and therefore Tyler has been 'wrong.' 

Nuanced = Tyler's argument

Cartoon for children = Schiff

fonzannoon's picture

You are ridiculous. He has been right about QE so far and yes he said they could cut a few purchases but will eventually have to do moar. So your posts have no value to them.

ejmoosa's picture

This is more like the deficit/debt debate in my mind.  Reducing the deficit does not reduce debt.  Ending the taper includes reversing it's actions and getting back to 0.

So the Fed tapered by 10 billion a month.  So at the end of Jan 2014, the Fed will have 1.265 trillion in QE versus 1.275 trillion if they had not?

I just want to know when they are gonna repaper the markets and withdraw that 1.265 trillion(and growing) amount?

My guess is never.


highly debtful's picture

I am one of those dumbasses that predicted that the Fed will not taper, as in never. So clearly I was wrong about that. For now.

But I still think that violent market reactions to this tapering will make them pick up QE in full force again and even digitalise ever more dollars on a monthly basis.

Until something finally gives.