The Fed Buys 47 % of Last Week's Treasury Notes Auction ?

Discussion in 'Economics' started by ASusilovic, Aug 8, 2009.

  1. ...

    Good grief! Just last week, when the auction results were announced it was trumpeted to great fanfare that there was "more than sufficient" bid-to-cover, "strong demand" and all the rest.

    And now it turns out that 47% (!) of the bonds that were taken by the primary dealers in that auction have been quietly bought by the Fed and permanently secreted to its balance sheet.

    They didn't even wait a full week! A more honest and open approach would have been for the Fed to simply buy them outright at the auction but this way, using "primary dealers" and "POMOs" and all these other extra steps the basic fact that the Fed is openly monetizing US government debt is effectively hidden from a not-too-terribly inquisitive US press and public.

    The speed of the shell game is accelerating.

    This immediate repurchase of newly auction bonds by the Fed tells us that demand for these bonds is not nearly as high as advertised, and that things are not quite as strong as represented.

    And oh, by the way, don't expect any stock market weakness while so many billions are being shoveled out the Fed and into the pockets of the primary dealers. They'll have to do something with all that freshly minted cash...

    Hum...47 %? Sounds like a monopoly, or ?:confused:
  2. i am a little confused. can you confirm if i have understood it please correct me if i am wrong.

    the fed is issuing more debt (is this debt backed by assets or is it printing money) then they are buying half of it back to make it look like there is more demand for it then there is. one question that arises from that is where are they getting the money to buy this debt back from. it would suggest they are using the 53 percent that was bought from them to buy the other 47 percent.

    are they buying back some of the debt they issued with the money they got from selling the debt? it is confusing because the fed gets its money from issuing debt so to buy it back they would have to use the money they received from previous debt sales?

    can you answer this?
  3. the1


    That's basically it. The Fed gives money to the US Government through the issuance and sale of bonds. If demand is too soft then the Fed buys the bonds. The Fed goes to their keyboard and types in the amount of the bond issue and credits it to the Government account and then do the same to their own account so they can purchase the bonds. The money is created exactly the way you posted this question -- with a few strokes on your keyboard.

  4. FED have already bought $237B and plan to buy another $300B.

    NEW YORK (Dow Jones)--The Federal Reserve Bank of New York announced Wednesday its latest round of Treasury debt purchases.

    The securities are being bought as part of a program to stimulate economic growth by helping to keep longer-term borrowing costs down. The Fed has pledged to buy as much as $300 billion in Treasurys by autumn. It has already purchased about $237 billion in Treasurys.

    The Fed said that it would buy Treasurys in the maturity range of May 15, 2012, to Nov. 30, 2013, on Monday, Aug. 10.

    It also will buy the date range of Aug. 15, 2026, to May 15, 2039, on Aug. 11; Dec. 31, 2013, to April 30, 2016, on Aug. 17; and Feb. 15, 2020, to Feb. 15, 2026, on Aug. 19.

    -By Deborah Lynn Blumberg, Dow Jones Newswires, 212-416-2206;
  5. Hum...47 %? Sounds like a monopoly, or ?:confused: [/B][/QUOTE]

    mwahaha! too funny!:D

    These guys aren't leaving anything to chance. I guess when your "all in" you can't afford to.
  6. morganist, I am shocked at your ignorance, you being a macroeconomist and all...

    The Fed doesn't issue bonds. The US Treasury issues bonds, which the Fed is currently buying as part of its outright treasury purchase program.

    I might add that this is EXACTLY what's going on in your native country. The Bank of England is buying GBP175bn of gilts issued by the Debt Management Office, which is part of Her Majesty's Treasury.

    As to the rest of this conspiracy theory, as I commented in another thread, the arguments put forth are a crock of high-grade bullsh1t, as anyone who's familiar with the bond mkt will easily be able to tell you.
  7. Where does it say the Fed will buy $237bln + $300bln = $537bln of debt?

    The Fed has pledged to buy as much as $300 billion in Treasurys by autumn. It has already purchased about $237 billion in Treasurys.
  8. achilles28


    The FED already owns roughly half of all outstanding US Treasuries, as of 2008. No idea what it is now.

    So the 47% purchase is in-line with their current holdings and foreign proxy demand.
  9. martinghoul it wasn't a genuine question. it was a sarcastic rhetorical question making sure i understood what the op was saying, it wasn't my position i was trying to clarify the op's position.

    i understand the central banking system. i understand how they issue money and bonds. what i was confused about is the terminology used in some of those posts. when people are talking about purchasing the bonds or selling the bonds are they in actuality trying to talk about open market operations or have i misunderstood (or more importantly have they misunderstood).
    #10     Aug 9, 2009