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Here's Who is Selling Treasuries - 3/9/21

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We got one of his usual insightful comments from Jimbo, Down Under in Oz, late last night. I wanted to share it with you, along with my comments below. 
 4 hours ago, Jimbo said:

THE SOUND OF ONE BOND BUYER CLAPPING

So the FED buys $180 Billion in treasuries a month.

It's still not enough.

Too many private sector sellers unloading onto the FED.

When will the FED go "FULL BOND" ???

(Thats when the FED buys enough bonds to stabilize the ten year).

How much bond buying is enough???

And the MONEY question always is:

At what rate will the FED go FULL BOND.

Is it 2%???

Is it 2.5% ??? (The WW2 rate).

Jimbo - Agree with most of what you wrote except private sector sellers unloading to the Fed. There's no evidence of private sector selling.

Also, on a technicality, total Fed monthly purchases are around $180 billion a month. Only $80 billion are direct purchases of Treasuries. $100 billion are MBS purchases.

But it's all cash to Primary Dealers, so the effect is the same. The dealers can do whatever they want with that cash. They use some to buy Treasuries, along with more MBS or whatever else they want to accumulate in inventory.

It's that second transaction, the dealers buying other stuff, that pushes the new cash into the market, where the sellers of those securities can then use that cash to buy more Treasuries. The result is that the Fed is either purchasing outright or indirectly funding the purchase of most new Treasury issuance via its daily purchases of Treasuries and MBS. 

But are they also sellers, depressing the bond market?

No.  

The US Treasury is the seller who is crushing the market. Yes, Primary Dealers are rotating their inventory out to the Fed, but buying more every week to keep those inventories stable. At this point, they are merely strawmen for the Fed. They're broke.

Meanwhile, banks in total continue to accumulate more Treasuries as they're issued.

fredgraph.png

Treasury holdings of other classes of investors are reported quarterly in the Fed's Z1. The next report comes out this week for Q4 2020.

The data through Q3 shows that all investor classes except pension funds had significant increases in their holdings from the end of 2019 through Q3 2020. The drop in pension funds was slight and not material to the totals held by all investors.

Total investor holdings not including Fed holdings, grew from $16.9 trillion at the end of 2019, before the pandemic expansion of issuance, to $18.9 trillion at the end of Q3 2020. This includes bank holdings shown on the chart above.

So that means all classes of investors increased their holdings by $2 trillion in the first 3 quarters of 2020. The problem is that the Treasury increased supply by $3.6 trillion over that period. The Treasury is the 700 pound gorilla seller, the elephant in the room. It is issuing massive piles of Treasury dung, that will only grow larger over the next few months. 

The Fed was taking down or financing an amount GREATER than Treasury issuance, from March through July last year. Then the Fed cut back to only funding 85-88% of new issuance.

That's when the problem started. Investors kept buying. Only the Fed had cut back from buying or funding 100% plus of net issuance to 85-88%. That's what fucked the Treasury market.

With the bond market crashing, the Fed will be back, this time with infinite QE.

To post your observations, and snide, but good-natured, comments, click here to register. Be sure to respond to the confirmation email which is sent instantly. If not in your inbox, check your spam filter.

 

Time for a Stock Market Six Month Cycle Low

 

Infinite QE Is Coming Despite Skyrocketing Economic Growth

 

Meanwhile, here's some free stuff I've written about this unfolding catastrophe.

US Treasury Injects Another $30 Billion Into Market

Treasury Announces It Will Inject ANOTHER $25 Billion For $125 Billion Weekly Total

 

 

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I just ran downstairs to the little Croaitalian joint to grab a bite to eat and brought it back up. Got this.  Ten bucks. Yummy. But I could eat two bowls.    It looks like puke but it

The chart is just so ugly. ES is back at the top of the downtrend channel again. 5 day cycle projection is 3910. So that strongly suggests that a breakout is coming soon to a screen near you. 

tvc_9740971fc6eadbddf20be6df7a78ebf6.png
Click to engorge

But if they're going to 3910, they need to get through layers of resistance up the wazoo. The first is here at the trendline at 3865. Then 3880. Then 3895. 

The positions of the indicators don't exactly inspire confidence either. But the Treasury is pouring $25 billion in cash into the market today with T-bill paydowns. Then on Thursday it will add another $30 billion. Call it a full court press. 

Meanwhile the big picture:  

Time for a Stock Market Six Month Cycle Low

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Well, I'm going to take a walk up to the sports center to see if I can get vaccinated. It's about a half hour walk. Chances are I won't be back for the open. But if I'm lucky, I'll have a shot. 

Yuck yuck. 

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No luck. I have to be on a list. So I got on two lists. But the order is supposed to come from a doctor. And I can't get a doctor to answer the phone. 😆

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Once the Fed starts buying in huge amounts then they can cap rates. It is this tricky period until they do that is the problem.  I'm thinking there is a sort of gentlemen's agreement not to pressure leveraged Treasury coupon holders because soon enough it will be the Fed to the rescue.  With some winks and nods that losses will be covered, somehow if needs be. 

The lesson of 87 and beyond is that banks never have to go bankrupt. Some are allowed to perhaps but none have to.. Help those in trouble until the trouble subsides is plan A.

China has built dozens of giant cities, rail and road networks, huge factory infrastructure, and on and on, without the national government incurring any debt.  Local governments do it via bank lending.  Here we have to go through contortions trying to get the money into the people economy.  Do Chinese banks admit losses?  There have been a few banks and bond funds go under now and then but I can't figure out how mostly empty cities built with credit are working out for the banks, Well it's the new age, Nobody has to go bankrupt.

If you get your  shot I assume they will give some kind of certificate. I got one here. I would think that will be part of being allowed to travel internationally in the coming months. 

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Get a bicycle Lee and ride all over the city and visit doctors till you find one who will give you the OK.  Get one anyway. Get an ebike.  $1500 American on Amazon, or less. 

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5 day cycle projection is 3940. 

I wouldn't need to buy a bike since I don't plan to stay here permanently. As I recall most European mid sized and large cities have bike sharing systems. Zadar has one a couple blocks from me at the University.  

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I just ran downstairs to the little Croaitalian joint to grab a bite to eat and brought it back up. Got this.  Ten bucks. Yummy. But I could eat two bowls. 

PXL_20210309_151136036.jpg

 

It looks like puke but it was good. LOL 

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3912 looms large on the ES. If they take that out, the measured move implication would be 4100. If they fail to clear that, the whole picture would become bearish as hell. 

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Ran my screens late today- just now. There were 106 signals. 90 of them were buys. I guess we know how this will resolve. 

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