Stocks Slumber As POMO Pump Fails To Spark More Exuberance

Apart from a 45-minute period from 1030ET to 1115ET (POMO) of totally failed momentum ignition, US equities and USDJPY were once again perfectly coupled leaving the Dow and S&P in the red today and the rest practically unchanged on dismally low volumes. Treasuries continue to slide with yields now 5bps (30Y) to 10bps (5Y) higher in the last 2 days (the worst 2 days for 5Y in almost 2 months). The USD ended practically unchanged on the week (once again) as EUR weakness (Coeure comments on negative rates) offset GBP strength (Carney comments). VIX traded down to 14.02% intraday (and the term structure is very steep and complacent once again). Gold (new 3-month highs) and silver surged intraday but the afternoon saw selling even as bonds, stocks, and the USD weakened. Dow remains below 16k.

The correlation remained strong apart from a total dislocation between 1030 and 1115ET (POMO) that failed to spark any momentum in US equities

The day started with the ubiquitous pump for retail but then faded

The Nasdaq remains the only major index in the green for 2014...

Treasuries continues to push higher (but remain considerably less positive than stocks)...

FX markets were volatile BUT the USD index remains unchanged on the week (EUR weakness on Coeure's negative rates comments and GBP strength on Carney comments)...

Gold made new 3-month highs but PMs were sold in the afternoon as stocks went limp and bonds sold off...

Charts: Bloomberg

Bonus Chart: (h/t @Not_Jim_Cramer) Fed admits its balance sheet has "ballooned" but asset prices not in a bubble...?

Bonus Bonus Chart: (h/t @BennettWoodman ) - Sustainable? Profits are above trend by a wider margin than all previous profits booms save 1916...

Comments

[CrashisOptimistic]

There are a LOT of leveraged folks who have had their face ripped off by the Treasury yield down from 3% at 1 Jan.  Those people have a huge incentive to manufacture good economic growth news even from the horrendous jobs report.  And news of no pause in taper (must mean great economy).

The data will continue to show weakening growth and the yields will drop and they will need new faces.

[NotApplicable]

Volatility is good, no?

[fuu]

Hard to make 2 and 20 without volatility.

[...out of space]

wrap up

exclusive order for raise min. wavges (inflation ) by obama

and suspend dept limit by congres

today was a good day / sarc

[Winston Churchill]

Pretty wild action in cable today.

POMO again tomorrow, if that fails again....

[Say What Again]

Are you sure there is a POMO tomorrow (2/13/14)?

http://www.newyorkfed.org/markets/tot_operation_schedule.html

[fuu]

http://www.newyorkfed.org/markets/omo/dmm/historical/tomo/temp.cfm

Pretty much open every day.

https://docs.google.com/spreadsheet/ccc?key=0AhiOhcEEaBHudFZXVXZWS3pHUmp...

[halfawake]

Speak for yourself, exuberance is a state of mind.

[slaughterer]

Everybody "realistic" is calling a double top at 1850.  Then SHTF for March/April.   Which means: none of that will happen.  

[halfawake]

bank reserves... anticipating a run or something?

[Winston Churchill]

Tells you that reverse reps are not draining liquidity from the banks.

They are flipping that colateral on to the SBS for cash, and must be losing on the spread.

Hmmm

[X_mloclaM]

The New York Reserve Bank is also authorized and directed by the FOMC to execute reverse repurchase agreements with primary dealers or selected money market funds through a tri-party arrangement. pp135/304 BST Accounting manual

WP11/256 Velocity of Pledged Collateral, Singh: The collateral pledged by dealers towards the repo is discounted by the lender, and protects the lender against a change in its value. However, such pledged collateral sits with custodians and is not rehypothecable to the street. The collateral is segregated and identifiable in case of default of the collateral provider...

--would not the other FRBs require this, and also limit substitution in the CSA as the SOMA backs their fiatscoes?

Lenders and dealers agree bilaterally on what baskets of securities they will trade. This collateral cannot be re-pledged to the ‘street’. However, it is not frozen in place, in that substitutions of collateral are possible during the repo. For example, a dealer can pull some agencies out of a "live" repo, pledge or sell them, after substituting in some treasuries. So, churning due to re-pledging is restricted

...Dealers in collateral management generally differentiate between the tri-party type of collateral and client collateral which has unlimited re-pledging rights

[Winston Churchill]

Wasn't it in the repo rules you could not do that in 2008.Worked out well I recall,

Bear Sterns only used the same colateral 42 times at once.

Rules ,schules ,are for serfs

[X_mloclaM]

yep, but they (and MF Global) were runnin it in private reuse, through UK, and not mandated to tri-party

...Dealers in collateral management generally differentiate between the tri-party type of collateral and client collateral which has unlimited re-pledging rights

[TheRideNeverEnds]

We are just taking a break before the push through 1850 on our way to close FEB @ 1900

[halfawake]

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[disabledvet]

that's not the Nasdaq...that's the NSAdaq!

http://www.youtube.com/watch?v=4-rkJmRiFug