Posted on 09/22/2009 7:52:55 PM PDT by qam1
The degree of intermediation by the Federal Reserve in the issuance of US Treasuries hit a record in Q2, accounting for just under 50% of all net UST issuance absorption. This is a startling number, as the Fed's $164 billion in Q2 Treasury purchases dwarfs the combined foreign/household UST purchases of $101 billion and $29 billion, respectively, over the same time period. In fact, the Fed was a greater factor in UST demand than all three traditional players combined: Foreigners, Households and Primary Dealers, which amounted to a $158 billion in net Q2 purchases.
This dramatic imbalance puts a lot of question marks over how the upcoming hundreds of billions in incremental Treasury purchases will be soaked up, now that QE only has $15 billion of capacity for USTs: with Households lapping up risky assets it is unlikely they will look at Treasuries absent some dramatic downward move in equities, while Foreign purchasers, which many speculate are in a game of Mutual Assured Destruction regarding UST purchases, have in fact been aggressively lowering their purchases of Treasuries (from $159 billion in Q1 to $101 billion in Q2, an almost 40% decline in appetite!). Will the US make these purchases much more attractive come October when QE for USTs ends? And if so, what kind of rates are we talking about? One thing is certain: in terms of priorities of the Federal Reserve, keeping the equity market buoyant, is a distant second to ensuring successful auction after auction well into 2010. After all there is near $9 trillion in budget deficits that need financing over the next 10 years......
(Excerpt) Read more at zerohedge.com ...
Thanks very much for posting. Fascinating.
Ping.
what was the typical Fed purchase in past 10 years - per quarter? Anyone know?
They’ve never done this before.
Ping.
Get ready for the $300 Big Mac.
the Fed has NEVER purchased TREASURIES????
But they said they would not monetize the debt! /s
Outstanding/humorous/educational/linked commentary at the site also.
This can’t be good.
ping
Until recently, no, not to my knowledge. Not sure why TD refers to it as a ‘record’. Maybe because it’s more than Q1. Wait till Q3...put on side 2 and let’s rock! :)
Monetisation of debt is the second, and this addiction is invariably fatal.
There is no cure save the extermination of the debt-addicts and the direct reversal of both policies, preferably by law, but de facto by any means available.
If I had a thoroughly sound investment programme to offer to you, and to our colleagues here, I should do so, but -- dammitall -- I haven't one.
We currently owe 11,800,000,000,000. Thats trillion. The bailouts/TARP/etc have cost an addition 11,900,000,000,000. Thats a total of almost 24 trillion in outstanding debt. That does not include unfunded liabilities or the credit derivative shenanigans. This country is in a world of hurt.
Any body who has money in the bank or safe deposit boxes or CD’s would be wise to read what the banks did during the Great Depression.
Just imagine what a nice juicy prime rib steak in a half decent restaurant will cost.
Not good. I knew that the Fed was buying a lot of T Bonds, but had no idea it was as high as this.
bump
Uh, that would be “zero.”
The Feds’ $300billion program to buy treasuries ends in Oct. It was extended one month. What is not stated is that the Fed has no funds to buy more treasuries with after the $300 billion is expended (only $15 billion left). ‘Money’ is not printed. DEBT is printed when the Fed monetizes the debt. The Fed will have to print debt out of thin air in regard to all of the administrations ‘debt’ needs...healthcare bill, climate change bill, etc.
Taxpayers, states, IRS receipts are on a significant downslope, and, piling on further taxes and debts is counterproductive. THe political ‘nuclear’ option of the Senate Dems in passing a healthcare bill will be just that, but, ‘financially nuclear’.
We have not had true capitalism since 1970. In ‘71 we went to Fed Res notes good for debt, and, the rest is history. The history and the result are covered well in this piece by Henry Liu in 4 pages:
http://www.atimes.com/atimes/Global_Economy/JG22Dj06.html
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.