This Is Where Today's Buying Deluge Came From

Tyler Durden's picture

Many are scratching their heads wondering how it is possible that with all of today's economic data misses the stock market not only ignored all the relentless bad data, as it has for the past 5 years (yes, yes, the weather, we know) but managed to surge to a new all time high. Not us: we forecast precisely what would happen yesterday when we brought our readers' attention to what was a record Fed-assisted window dressing operation in the form of some $242 billion in revere repoed Treasurys being provided to dealer banks in order to make their books look attractive for quarter end. Specifically we noted yesterday that "one should consider that tomorrow - with their books well padded for the March 31 daily security "holdings" - the banks will almost certainly unwind over $100 billion if not more of today's reverse repo, an amount that is now equal to nearly two full months of QE. Where that money will go, only the (NY) Fed and a few bank CEOs know."

Today we know not only where that money went as was implied, it went in risky assets i.e., the S&P500, but more importantly we also got the number right: today's reverse repo was amounted to just $113 billion, a $130 billion liquidity release from the Fed's reverse repo operation in one day!

So while QE may have tapered to a "measly" 55 billion per month, on just the first day of April risk assets experienced the additional benefit of over two full months of QE injected into the stock market in one single day!

And now you know where today's buying deluge came from.

The flipside, the easy money for the month of April, which as we also noted previously has historically been the best performing month of the year, has now been used up.