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Reverse Digital Confabulator 5/1/2020

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Utter nonsense from people who have no idea what they're talking about. Gross issuance is irrelevant when the Fed (not to mention the ECB and BoJ) buys or finances all of it. It means that net issuanc

They broke 2845 on ES where 200 Ema sma on 1 hour interval.  Next stop 2765 as a key support. 

The Fed was tight 2000-03. Dealers could not maintain orderly markets.  And no. They system was not in place 2007 to 2009. The Fed froze out and starved the Primary Dealers and instead went only

1 hour ago, SiP said:

Utter nonsense from people who have no idea what they're talking about. Gross issuance is irrelevant when the Fed (not to mention the ECB and BoJ) buys or finances all of it. It means that net issuance is zero.

In fact, it was below zero. The Fed bought more than gross issuance until mid April.  

Case in point. If the US Treasury issued $1.5 trillion and the Fed bought $1.5 trillion, how much did investors and foreign governments have to absorb? 

Zero. 

If the Fed bought more than total issuance, then there was a shortage of paper and yields would plunge to near zero. 

Which is exactly what happened. 

This kind of garbage is exactly what Wall Street wants to dish out to keep the public befuddled.  

The investing public does not matter. Only the  securities dealers and their financiers the central banks, matter. 

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1 hour ago, DrStool said:

Correct. Maturity distribution is totally up to the Fed.  

I didn't think of the possibility that rollovers might be a problem. Over the weeks where the Fed was buying all of it, obviously not. But in recent weeks when the Fed has been buying less and less, and now only a small fraction, it's something to think about. I have no doubt that the Fed will need to ramp up again as the Treasury continues to pound the market. Also I may have underestimated the number of weeks they'll need to continue at this $200-250 B per week level.  

Isn't SOMA going to implode it they don't keep rolling over  the T Bills? That is unless their other buying, corporate debt and now munis takes up the slack. 

If you didn't catch it the Fed says it will release the results of it's corporate paper purchases, who from and how much, within at least 30 days. Very nice of him. Where it is on the H41 which better be kept current I'll leave up to you.

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The Fed always rolls over its paper.

Always.

Except that one time. 

It tried to redeem some during the 15 months of "normalization," the only time it ever did so. We all saw how that went.  They won't try that again any time soon. 

I think that even slowing the purchase rate will show up with catastrophic result. 

So we'll see. 

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The paper that the Fed took off the market will stay off the market. This is permanent monetization. The Treasury will pay the Fed whatever the interest rate is, and the Fed will pay most of that back to the Treasury. So there's essentially no overt cost to the government for issuing this debt.

The public will pay the price in whatever the rate of consumer price inflation is.  

That will be uneven, and unevenly measured. When markets for certain goods freeze up and cease to exist, it's difficult to measure their  true price levels.  This will happen in housing again, where prices will initially collapse.  So we could see deflation there. 

Meat pricing could be a good example of inflationary collapse as supply chains shut down.  

Everything else, first the deflation, then the inflation. Unless securities prices collapse, margin is destroyed, and central banks don't replace it. If they do, then we get hyperinflation. 

I think that some of us face starvation, or at least deep deprivation, that we never could have imagined happening in MAGAmerka. 

The direction governments are taking in reopening social life before the virus is conquered is a social experiment that will have interesting results. There could be a culling that leads not only to mass death, but to a much larger permanent social underclass.  

This will only be mitigated by a good vaccine that comes much sooner than the 12-18 months they're talking about.  But even then, most businesses will opt not to bring back most workers.  

There are all kinds of ways that this could play out badly. I'd like to hear the opposite arguments for how things might turn out better than I expect.  

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24 minutes ago, DrStool said:

The paper that the Fed took off the market will stay off the market. This is permanent monetization. The Treasury will pay the Fed whatever the interest rate is, and the Fed will pay most of that back to the Treasury. So there's essentially no overt cost to the government for issuing this debt.

 

When a T Bill matures it disappears off the market. It disappears off the SOMA too. The money the Treasury pays to the Fed then disappears as well, except the .001% gain which it gives to the Treasury, after expenses of course..  Or what am I missing.

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2 hours ago, Jorma said:

When a T Bill matures it disappears off the market. It disappears off the SOMA too. The money the Treasury pays to the Fed then disappears as well, except the .001% gain which it gives to the Treasury, after expenses of course..  Or what am I missing.

The Treasury is auctioning t-bills again when the first wave of t-bills expires. Again and again. Thats a permanent rollover of debt.

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Monthly SP500

55 EMA held support during march crash.

No close below 55 EMA. big Bull trend intact. However market still below 9/12 EMA on monlthy (2916) which means dont prefer leveraged longs.

 

 

miesięczny.JPG

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On a 1H and 4H charts you would see a channel with 2780-2800 a a v good support.

 

Bears need to take this out (2780-2800) to..... test 2670 (200 EMA SMA on weekly)

4godzinny.JPG

godzinny.JPG

tygodniowy.JPG

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4 hours ago, SiP said:

The Treasury is auctioning t-bills again when the first wave of t-bills expires. Again and again. Thats a permanent rollover of debt.

Sure but unless the Fed buys the new paper with the returned principal then SOMA shrinks. I mean the Treasury  does redeem the principal back to the Fed right?  

The Fed used to do only T Bills and that was called POMO?  So they don't redeem the T Bills?

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Treasury’s $4 Trillion Funding Task Signals Record Auction Slate

The majority of dealers also expect the government to signal larger sales are ahead for notes of all other maturities, as well as floating-rate and inflation-linked securities

The Fed has trimmed its Treasuries buying to $8 billion a day, from a peak of around $75 billion as calm has returned to the market.

https://www.bloomberg.com/news/articles/2020-05-03/treasury-s-4-trillion-funding-task-signals-record-auction-slate?sref=eo0IIyEe

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