Fed Extends Twist Through End Of 2012, Prepared To Take Further Action, Market Unhappy

Tyler Durden's picture




 

As always, Goldman Corzined anyone who listened to its call that an epic QE is coming. Fed did the worst possible outcome for risk- merely extended Twist, just as the credit market predicted it would 3 weeks ago:

  • FED SAYS IT IS PREPARED TO TAKE FURTHER ACTION `AS APPROPRIATE
  • FED TWIST EXTENSION TO SWAP $267 BLN OF TREASURIES BY END 2012
  • FED TO SELL OR REDEEM `EQUAL AMOUNT' DEBT DUE 3 YEARS OR LESS
  • FED TO BUY TREASURIES DUE IN 6 TO 30 YEARS AT `CURRENT PACE'
  • FED SAYS EMPLOYMENT GROWTH `HAS SLOWED'
  • FED SAYS INFLATION HAS DECLINED, REFLECTING OIL
  • FED REITERATES ECONOMY `EXPANDING MODERATELY'
  • LACKER DISSENTS FROM FOMC DECISION

This means that soon Primary Dealers' entire balance sheets will be filled with the entire inventory of Fed 1-3 year bonds. Market not happy. Full June statement here.

Full April-June statment redline.

 

 

The New York Fed announces more details on what will be bought:

On June 20, 2012, the Federal Open Market Committee (FOMC) directed the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York to continue through the end of the year its program to extend the average maturity of the Federal Reserve’s holdings of Treasury securities.  Specifically, the Desk was directed to purchase Treasury securities with remaining maturities of 6 years to 30 years and to sell or redeem an equal par value of Treasury securities with remaining maturities of approximately 3 years or less.  The continuation of the maturity extension program will proceed at the current pace and result in the purchase, as well as the sale and redemption, of about $267 billion in Treasury securities by the end of 2012.

The FOMC also directed the Desk to continue reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities (MBS) in agency MBS, and to suspend, for the duration of the maturity extension program, rolling over maturing Treasury securities
into new issues at auction.

Purchases of Treasury securities for the maturity extension program will be distributed across five sectors using the same approximate weights that have been used in the purchases to date:

Nominal Coupon Securities by Remaining Maturity*
TIPS**
6 – 8 Years
8 – 10 Years
10 – 20 Years
20 – 30 Years
6 – 30 Years
32%
32%
4%
29%
3%

 

*The on-the-run 10-year note will be considered part of the 8- to 10-year sector.
**TIPS weights are based on unadjusted par amounts.

This distribution could be altered if market conditions warrant.

A combination of sales and redemptions of Treasury securities will be conducted to match the amount of purchases over the program.  Sales of Treasury securities will take place in securities maturing between January 2013 and January 2016.  Securities maturing in the second half of 2012 will be redeemed—that is, allowed to mature without reinvestment—since redeeming maturing Treasury securities has a nearly identical effect on the portfolio as selling securities that are approaching maturity.  Once the maturity extension program is completed, the Federal Reserve will hold almost no securities maturing through January 2016.

The Desk will continue to publish a tentative schedule of operations for the following calendar month on or around the last business day of each month. The schedule will include the anticipated amount of redemptions, purchases and sales to be conducted, operation dates, settlement dates, security types (nominal coupons or TIPS) to be purchased or sold, the maturity date range of eligible issues, and an expected range for the size of each operation. The next schedule of operations will be released on Friday, June 29.

All other program details remain the same at this time.  Additional information on the program’s structure can be found in the revised Frequently Asked Questions for the Maturity Extension Program

 

* * *

 

Finally, and again, this is what happened after the Fed disappointed last time around:

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Wed, 06/20/2012 - 12:35 | 2543842 Conman
Conman's picture

Goldman screws muppets yet again.

Wed, 06/20/2012 - 12:35 | 2543851 tsx500
tsx500's picture

SUCK IT BERNANK !!!

Wed, 06/20/2012 - 12:39 | 2543879 SHEEPFUKKER
SHEEPFUKKER's picture

Twist was such a smashing success before, so surely extending it will provide even more benefit to the global economy.  /sarc

Wed, 06/20/2012 - 12:41 | 2543898 Mark Carney
Mark Carney's picture

SURPRISE!!!!

 

Wish I would have manned up and bought Puts...but Im no gambling man.

 

 

Wed, 06/20/2012 - 12:44 | 2543922 Global Hunter
Global Hunter's picture

Come on are you trying to tell me that you Mark Carney, GS alumn did not front run this in your PA, your mother's PA and your offshore PA in the name of your cat?  No gambling man pssst pussy

Wed, 06/20/2012 - 12:57 | 2543981 NotApplicable
NotApplicable's picture

"C'mon let's twist again.

Like we did last Summer.

Yeah, let's twist again.

Like we did last year."

Wed, 06/20/2012 - 13:00 | 2544003 strannick
strannick's picture

Market is tiring of this game. Gold barely coughed up 3 bucks.

Wed, 06/20/2012 - 13:04 | 2544025 Divided States ...
Divided States of America's picture

Tyler needs to update the title to MARKET HAPPY. Nothing can derail this ponzi

Wed, 06/20/2012 - 13:05 | 2544043 Colombian Gringo
Colombian Gringo's picture

Nope,nothing except hanging all banksters.

Wed, 06/20/2012 - 13:05 | 2544036 Colombian Gringo
Colombian Gringo's picture

Lets get to root causes. Hang all banksters!

Wed, 06/20/2012 - 12:45 | 2543927 flacon
flacon's picture

You could have bought Molycorp. It's up 10% today. 

Wed, 06/20/2012 - 12:52 | 2543959 Thomas Anderson
Thomas Anderson's picture

Next up The Bernanke speaks to the market: "Bazinga!"

Wed, 06/20/2012 - 13:04 | 2543988 HarryM
HarryM's picture

Market is not Angry

VIX < 18

Actually their plan is genius

Create so much distrust in the market that everyone pulls their money out and invests in Real Estate , thus stimulating the economy - fucking genius

Wed, 06/20/2012 - 13:33 | 2544202 mkkby
mkkby's picture

Pimpco has been loading up on mortgage backeds thinking they'd be in the next QE.  Bill Gross is just another losing gambler along with his followers.  Why do people think he's a tuned in elite?

Wed, 06/20/2012 - 12:43 | 2543917 FlyoverCountryS...
FlyoverCountrySchmuck's picture

The markets must be propped up, at least until Election Day, NO MATTER HOW MANY HUNDREDS OF BILLIONS IT COSTS THE TAXPAYERS! COMRADE GREAT CHAIRMAN OBAMA's relection must not be endangered by this, no matter the cost.

(I've been calling this one for months)

Seriously, who is surprised by this? It's not like it's THEIR money they are using, after all.

Wed, 06/20/2012 - 12:47 | 2543938 Iam_Silverman
Iam_Silverman's picture

"The markets must be propped up"

Maybe you didn't understand what was posted - they are contimuing "Operation Twist".  That means they are buying U.S. Government bonds and bills, not securities.  That won't prop up any market, unless you are gaming Treasury ETF's.  Are you?

Wed, 06/20/2012 - 13:01 | 2544008 ActionFive
ActionFive's picture

Thinking the twist is where they place prices where they shouldn't be.

The rule is that all prices have to make things look good.

So, he could be right.

Wed, 06/20/2012 - 13:35 | 2544213 mkkby
mkkby's picture

Maybe you didn't understand.  They're gaming the long end down even more, which is artificial stimulus.  2 years plus and you're still this clueless????

Wed, 06/20/2012 - 15:08 | 2544647 Iam_Silverman
Iam_Silverman's picture

"2 years plus and you're still this clueless????"

I guess so.  But to me, Treasury Yield does not equal (Stock) Market valuations.  If it were equal, then why doesn't the yield change when jobless reports, inventory analysis, durable goods orders, etc. are spun to the positive and the Market (DJIA, NASDQ, S&P 500, Russell 2000) rallies to the moon?

Wed, 06/20/2012 - 12:39 | 2543878 veyron
veyron's picture

I'm surprised there isnt a really large fund which trades against goldman's calls ...

Wed, 06/20/2012 - 12:41 | 2543903 Marginal Call
Marginal Call's picture

That would be Goldman's trade desk. 

Wed, 06/20/2012 - 12:42 | 2543904 Rongen
Rongen's picture

There is, it's called Goldman Sachs!

 

Edit: Marginal Call beat me to it :(

Wed, 06/20/2012 - 12:43 | 2543916 SeverinSlade
SeverinSlade's picture

Um, what do you think ZH does all day? 

Wed, 06/20/2012 - 12:44 | 2543918 FXPortent
FXPortent's picture

Muppet goes *POOF* into the wind

Wed, 06/20/2012 - 12:44 | 2543919 HaroldWang
HaroldWang's picture

And here comes the rally off the lows on QE3 door still open and CNBC spinning it positive for QE coming. Market starting to love it!

Wed, 06/20/2012 - 13:07 | 2543931 vast-dom
vast-dom's picture

 

 


  • FED SAYS IT IS PREPARED TO TAKE FURTHER ACTION `AS APPROPRIATE -> ILLEGAL
  • FED TWIST EXTENSION TO SWAP $267 BLN OF TREASURIES BY END 2012 -> ILLEGAL
  • FED TO SELL OR REDEEM `EQUAL AMOUNT' DEBT DUE 3 YEARS OR LESS -> ILLEGAL
  • FED TO BUY TREASURIES DUE IN 6 TO 30 YEARS AT `CURRENT PACE' -> ILLEGAL
  • FED SAYS EMPLOYMENT GROWTH `HAS SLOWED' -> ILLEGAL POLICY HAS MADE THINGS WORSE
  • FED SAYS INFLATION HAS DECLINED, REFLECTING OIL -> inflation targeting is illegal according to the Federal Reserve’s mandate.
  • FED REITERATES ECONOMY `EXPANDING MODERATELY' -> ONLY WHEN FED BREAKS THE LAW AND IT IS NOT PRODUCTIVITY EXPANSION; HOPIUM & 1% SUBSIDIES ONLY
  • LACKER DISSENTS FROM FOMC DECISION -> UH HUH

when yours truly began investing in these markets i didn't sign up for TOTAL centrally planned subervsion of now bound, gagged, tied up and brutally (banker/fed) gang-raped markets. i am sure no one here did either...

Wed, 06/20/2012 - 13:03 | 2544006 THECOMINGDEPRESSION
THECOMINGDEPRESSION's picture

Goldman sucks knew EXACTLY what Bernanke was going to say. They lie just like every Government official, the media, accounting firm, the scam list is endless. We are probably into QE95 for all we know. There could be 600 trillion given to the banks, and it still isn't enough..

Wed, 06/20/2012 - 13:04 | 2544024 FL_Conservative
FL_Conservative's picture

Got to GO with the FLOW or STOCKS in de HOLE!

Wed, 06/20/2012 - 13:35 | 2544215 battle axe
battle axe's picture

Hey DOW, we will goose you a little, but just a little, because we have to keep our powder dry for the Middle East blow up coming soon. 

Wed, 06/20/2012 - 12:35 | 2543843 tsx500
tsx500's picture

SUCK IT BERNANKE !!!

Wed, 06/20/2012 - 12:35 | 2543844 flacon
flacon's picture

A centrally planned nightmare...

Wed, 06/20/2012 - 12:35 | 2543845 WALLST8MY8BALL
WALLST8MY8BALL's picture

Market Angry - Market Smash - Market Sad....

Wed, 06/20/2012 - 13:29 | 2544188 Metalredneck
Metalredneck's picture

Hulk depressed...

Wed, 06/20/2012 - 12:35 | 2543847 death_to_fed_tyranny
death_to_fed_tyranny's picture

FUCK OFF BERNANKE!

Wed, 06/20/2012 - 12:40 | 2543895 Floordawg
Floordawg's picture

I dunno, I'm starting to like the guy. He's making this shit WAY too easy!

 

Nah, fuck him... dead square in the ass.

Wed, 06/20/2012 - 12:35 | 2543848 Biosci
Biosci's picture

How much < 3yr debt does the Fed have left?

Wed, 06/20/2012 - 12:36 | 2543857 ReallySparky
ReallySparky's picture

All of China's.

Wed, 06/20/2012 - 12:39 | 2543882 Nostradamus
Nostradamus's picture

Yeah. I thought they were going to run out of all that short term debt by the end of August.

Wed, 06/20/2012 - 13:11 | 2544071 Matt
Matt's picture

Run out? I thought ~$100 Billion of fresh new USTs come out every month ...

Wed, 06/20/2012 - 13:41 | 2544239 Biosci
Biosci's picture

Fed, not Treasury.  Sort of defeats the purpose if they're buying as many freshly minted 3Y as they're selling under Twist2.

Wed, 06/20/2012 - 19:21 | 2545440 Matt
Matt's picture

Quantitative Twist; buy the short term treasuries from the Primary Dealers, sell them back and then buy long term Treasuries. Brilliant!

Wed, 06/20/2012 - 12:36 | 2543850 midgetrannyporn
midgetrannyporn's picture

The nonexistent market isn't happy?

Wed, 06/20/2012 - 12:50 | 2543945 HarryM
HarryM's picture

They're not happy ?

No reaction yet - will this turn into a rally yet again?  

 

Looks like this result has been "Priced into the market" already

Wed, 06/20/2012 - 13:00 | 2544002 midgetrannyporn
midgetrannyporn's picture

definitely bullish for (already) overpriced equities. lulz

Wed, 06/20/2012 - 12:36 | 2543854 T-roll
T-roll's picture

Bernanke to Wall Street "You're gonna have to let the market tank if you want to see the helicopters"

Wed, 06/20/2012 - 12:57 | 2543983 francis_sawyer
francis_sawyer's picture

can't have that before end Q2 or risk redemption notices

Wed, 06/20/2012 - 12:36 | 2543855 chinaguy
chinaguy's picture

Market NOT happy

Wed, 06/20/2012 - 12:36 | 2543856 Hedgetard55
Hedgetard55's picture

PMs not happy.

Wed, 06/20/2012 - 12:39 | 2543886 lsbumblebee
lsbumblebee's picture

Yes. "Investors" are selling their gold because the Fed has further debased the currency.

Makes a shitload of sense to me.

 

Wed, 06/20/2012 - 12:42 | 2543911 Nostradamus
Nostradamus's picture

But I am.  Time to buy up more PMs on the cheap.

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