POMO Summary And A Sack-Frost Frontrunning Cheat Sheet

Since the Fed has now purchased $320 billion in Treasurys since QE Lite (more than in all of QE1 combined) and $244 billion since QE 2, and the latest, but certainly not last, round of quantitative easing is more than a third done, it is once again time to provide a summary recap of what the Fed has purchased to date, as well as an advance frontrunning preview of both Monday's immediate POMO as well as of all POMO operations in the near future. Also, since the Fed no longer even cares about the optics of direct monetization as we disclosed first last week when we pointed out that Sack-Frost had monetized half of the Primary Dealer takedown from the just completed 3 year auction, the game is obviously starting to get quite dirty, and the FRBNY boys are fully convinced they can do whatever they want with impunity. Obviously, with all of a subservient puppet Congress bought off, they are absolutely right.

First, a summary of all 2010/2011 POMO purchases by maturity segment:

A complete breakdown of all POMOs in the last two POMO schedules.

An interesting observation, and one which we believe will be soon changed, is that comparing QE1 to QE2, the Fed is focusing far less on the 30 Year bond as can be seen by the OMO chart pattern. With the 30 Year now at 4.6% and rising, we are certain the next iteration of QE will see an increase in the 17-30 Year Segment from the current cumulative 6% to well double this tally. Of course, that QE2 will also see MBS and Munis as part of its "mandate" is also becoming increasingly more clear.

Looking at Monday's POMO, per Morgan Stanley's spline, the bonds most likely to be monetized are the 8.75% of 5/15/2017 and the 3.25% of 12/31/2016. The just auctioned off 2.75% of 12/31/2017 is not even among the top 10 cheapest bonds, which means that if on Monday the PN4 makes up for a material percentage of the $7-9 billion buyback, then something is very, very wrong.

And looking beyond just tomorrow, here are the bonds to buy in advance of the upcoming $80 or so billion in monetizations through the second week of February.