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Anti-POMO Sees Fed In $9 Billion Bond Sale First

Tyler Durden's picture




 

In a first for the Fed, 15 minutes ago the Fed started its first anti-POMO, or outright bond sale, this time for up to $9 billion in bonds due between 01/15/2012 – 07/31/2012. This is liquidity taken out of the market (think reverse repo) and money that can not be used to buy Netflix by the primary dealers. As a result, the recent (massively levered: thank you HFT in FX and 200x margin) surge in the EURUSD would make sense, as the last thing the market needs is for the robots to find a correlation between inverse POMO days and market drops, which would then be front run on any of the next anti-POMO days. The operation will conclude at 11 am EDT. Expect to see an end to the EURUSD rise as soon as the operation is concluded.

 

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Thu, 10/06/2011 - 10:37 | 1745479 economics1996
economics1996's picture

Fucking amazing.  Is the fact that the Fed is leveraged 56-1 having a impact?

Thu, 10/06/2011 - 11:11 | 1745717 CPL
CPL's picture

If you print the money doesn't matter what your leverage is.  It's like asking a lumberjack if they have enough wood.

Thu, 10/06/2011 - 10:37 | 1745481 toronto1
toronto1's picture

why some many losers here?

Thu, 10/06/2011 - 10:37 | 1745483 urbanelf
urbanelf's picture

Who was the buyer?  Themselves?

Thu, 10/06/2011 - 10:40 | 1745504 GeneMarchbanks
GeneMarchbanks's picture

But US citizens of course.

Thu, 10/06/2011 - 10:57 | 1745617 Infinite QE
Infinite QE's picture

Some Caribbean banking center. Fully owned by the Fed of course. All a shell game.

Thu, 10/06/2011 - 12:29 | 1746183 wrs
wrs's picture

It was oversubscribed 30 to 1.  It was MMFs buying them to replace the crap Euro Bonds they were holding and which the ECB is now gladly scooping up.  This is actually going to juice the markets since it means that the MMFs that got these Ts are more liquid.

 

On the other end of that, look at the maturities.  This stuff mostly matures by the end of May.  When it matures, it becomes cash again.  Of course it's as liquid as cash now, this stuff is needed as collateral for trading at the CME. 

Thu, 10/06/2011 - 10:39 | 1745497 Cognitive Dissonance
Cognitive Dissonance's picture

The Ponzi magicians will never run out of tricks. The only question is......when will the tricks no longer convince people to continue to deceive themselves. That, after all, is the end game and exactly what results when 'trust' remains long after it should have vacated the building.

To the exit James and step on it.

Thu, 10/06/2011 - 10:43 | 1745530 GeneMarchbanks
GeneMarchbanks's picture

What results is a mobocracy see Ortega Y Gasset.

Thu, 10/06/2011 - 10:46 | 1745543 HD
HD's picture

All they have done for two years is save the banks at the cost of tax payers and consumers. The bill is coming due, which is why you have thousands marching on Wall Street and the Fed...that isn't bullish folks.

Thu, 10/06/2011 - 10:55 | 1745602 bigdumbnugly
bigdumbnugly's picture

so many shells and only one pebble

Thu, 10/06/2011 - 11:08 | 1745680 disabledvet
disabledvet's picture

Make it count.

Thu, 10/06/2011 - 10:40 | 1745507 buzzsaw99
buzzsaw99's picture

if the market goes down they will postpone the sales.

Thu, 10/06/2011 - 10:44 | 1745532 GeneMarchbanks
GeneMarchbanks's picture

Yes and ban short selling.

Thu, 10/06/2011 - 10:49 | 1745575 dvsteenk
dvsteenk's picture

PPT is getting slow, it took them nearly 40 minutes to ramp S&P up 17 points

two days ago they did more than double in 45 minutes

i guess that conveniently killed all remaining shorts

back down from here on... heavy down

Thu, 10/06/2011 - 11:06 | 1745667 Vincent Vega
Vincent Vega's picture

And on the heels of this, about a 30 minute lag time, Treasury announces auction(s) of $21B 10yr, $13B in 30 yr, $32B in 3yr, and $56B in short term bills.

Thu, 10/06/2011 - 11:13 | 1745737 Jack Napier
Jack Napier's picture

Presumably the Fed will be buying these? It's not like anybody else will. So they try to make headlines convincing people they are selling bonds, when really it's still a buying frenzy overall. No wonder metals are up today.

Thu, 10/06/2011 - 11:31 | 1745837 Vincent Vega
Vincent Vega's picture

Yes, Jack, the Fed will probably end up with a good portion of the auctioned securities. But first they will go to the primaries who will in turn flip them to the Fed. Primaries got to make the spread and ass rape the tax payer. Nothing new to see here.

Thu, 10/06/2011 - 11:08 | 1745681 afdestruction
afdestruction's picture

I feel retarded, but I don't really get what this does. They're taking cash from the banks to sell as bonds? ....huh? Anybody care to explain?...Please

Thu, 10/06/2011 - 11:21 | 1745791 dr.charlemagne
dr.charlemagne's picture

The federal reserve create money out of thin air and buys things. when they buy bonds they lower interest rates and inject money to the creator of the bond. when the fed sells bonds, the money is removed from the economy. when they sell short duration bonds it puts upward pressure on short term interest rates, flattening the rate curve.

Thu, 10/06/2011 - 11:43 | 1745912 dvsteenk
dvsteenk's picture

when the fed sells bonds, the money is removed? can they use that money to buy stocks?

and when they buy bonds, then the primary dealers get money, no? so, what if they use this money to buy stocks?

in both cases, money flows into equities. Can this explain the current ramp job?

 

Thu, 10/06/2011 - 11:47 | 1745947 afdestruction
afdestruction's picture

My understanding now is that they will sell the short term bonds and use the money to purchase more long term bonds. Normally, short term interest rates are low and long term are higher. Selling short term bonds and buying long term causes this to reverse, which is why they call it operation twist. I knew about the long term bond buying part of it, but not about the short term sales part.

Thu, 10/06/2011 - 11:17 | 1745757 steve from virginia
steve from virginia's picture

There ya go! Operation Twist-ish, right on schedule.

Yr lookin' @ $30b per month, not enough to effect anything in the real world. Window dressing ...

Thu, 10/06/2011 - 11:47 | 1745946 EB
EB's picture

First POMO Treasury sale since May, 2008.  Anyone remember what happened afterward?

http://www.zerohedge.com/article/project-weimar-why-qe2-could-be-more-inflationary-you-think

And just to demonstrate how much it pains FRBNY to shed assets:

Thu, 10/06/2011 - 12:15 | 1746099 Bananamerican
Bananamerican's picture

1st thing i thought of... they used a FED induced market crash before to get the bailout machine rolling (withdrawing "liquidity" in the face of already declining "liquidity")

Maybe they're getting impatient...

Thu, 10/06/2011 - 12:44 | 1746256 fuu
fuu's picture

Anyone checked the slosh lately?

Thu, 10/06/2011 - 12:14 | 1746094 YesWeKahn
YesWeKahn's picture

Tyler, I think the correlation has been broken. When the fraud fed bought long term T the other day, the market tanked. I think the market will continue to rally until the day ends, I will be shorting again at the time.

Thu, 10/06/2011 - 12:26 | 1746162 walküre
walküre's picture

It's so fucked up, not even the robots know how to make sense of it.

Their algos are programmed to buy, buy, buy...

Keep it going Bots. People are selling into this shit.

Thu, 10/06/2011 - 12:31 | 1746198 NO1HOME
NO1HOME's picture

The Artisan/ Propaganda Class Citizen will have sway in awakening the Wetiko to the revolution.

 

http://www.youtube.com/watch?v=MlG5u4vb_FA&feature=youtube_gdata_player

Thu, 10/06/2011 - 12:42 | 1746244 rumblefish
rumblefish's picture

Help a slow laymen get his head around this... is the thinking that reverse pomo is bad for the $ ($ down) , thus when the sale is over, $ back up, Markets down?

 

Wed, 10/12/2011 - 09:52 | 1765339 karmete
karmete's picture

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