Treasury sales and Treasury buyers don't add up.

[charliebrown]

http://www.zerohedge.com/article/gre...chris-martenso

After a day of bashin zero hedge for the crumby CEF scare, here is a more sensible piece by Chris Martenson.

Basically the take down of treasuries by foreingers, is not lining up with the fed's custodial account and TIC data. Chris suggests that perhaps the Fed is funnelling money to other CB's to buy treasuries.

Well written, makes sense.

[Slimprofits]

Re: Treasury sales and Treasury buyers don't add up.

So now we know that nearly $1.5 trillion of new Treasury debt went out the door in 2009, along with another $371 billion in 2010. But where did it all go? Who bought it? Can we count on them to keep buying?

what ever happened to theory it was the TBTF banks buying treasury debt?

[bart]

Re: Treasury sales and Treasury buyers don't add up.

...
Basically the take down of treasuries by foreingers, is not lining up with the fed's custodial account and TIC data. Chris suggests that perhaps the Fed is funnelling money to other CB's to buy treasuries.

Well written, makes sense.

One also needs to take into account the SDR (new issuance) inflow during 3Q 2009. Then the totals are within $2B of balancing. I emailed Chris.

This does *not* affect the possibility of "external" or "back door" Fed financing.

[icm63]

Re: Treasury sales and Treasury buyers don't add up.

How do BART,

When and if will Interest rates rise...the FED cant buy ALL there own poop ! Can they seriously??

[rabot10]

Re: Treasury sales and Treasury buyers don't add up.

Kind of smells of old fish eh?

[icm63]

Re: Treasury sales and Treasury buyers don't add up.

Bart,

One also needs to take into account the SDR (new issuance) inflow during 3Q 2009. Then the totals are within $2B of balancing. I emailed Chris.

ALSO 2 years ago a massive number of folks purchased 1 yr or 2 yr USA TBills ( ie thru thr 2008 crash, approx $1Trillion or so). This stuff is about to roll over, and if they want to exit these positions and not renew then rates will rise.

[bart]

Re: Treasury sales and Treasury buyers don't add up.

How do BART,

When and if will Interest rates rise...the FED cant buy ALL there own poop ! Can they seriously??

Theoretically yes, but in actual practice no. Among other reasons, primary dealers are required to buy Treasuries - it's part of the contract to be a PD.

Bart,

One also needs to take into account the SDR (new issuance) inflow during 3Q 2009. Then the totals are within $2B of balancing. I emailed Chris.

ALSO 2 years ago a massive number of folks purchased 1 yr or 2 yr USA TBills ( ie thru thr 2008 crash, approx $1Trillion or so). This stuff is about to roll over, and if they want to exit these positions and not renew then rates will rise.

There are too many variables for me to have a strong opinion at this time... and the Fed has lots of bullets left, one of which (the Securities Lending Open Market Operation) they've been using lately to "help" keep the 10 year below 4%.

[icm63]

Re: Treasury sales and Treasury buyers don't add up.

.."Securities Lending Open Market"..

DO you have a chart on this activity ??

[bart]

Re: Treasury sales and Treasury buyers don't add up.

.."Securities Lending Open Market"..

DO you have a chart on this activity ??

Shirley you jest... ;)




My article from 2007:
http://www.nowandfutures.com/article...d_trading.html


TBonds only:



TBills only







Sample daily chart:






from my glossary:

Securities lending
A very specialized portion of what the Federal Reserve banks do (warning: this is an extremely specialized area with many technical terms - be sure to look up any unfamiliar words). Here's their definition from here:
"The Bank provides a secondary and temporary source of securities to the Treasury financing market through a Securities Lending program to promote smooth clearing of Treasury securities. The program offers securities for loan from the System Open Market Account (SOMA) portfolio in accordance with program terms and conditions. Securities loans are awarded to primary dealers based on competitive bidding in an auction held each business day at noon eastern standard time."

In plain English, the Fed loans Treasury bonds, bills and notes to major banks or securities firms and collects interest on those loans. In our opinion, those major banks or securities firms sometimes use the securities loaned in order to make money in the general stock and bond market, and sometimes at the expense of general investors. It's primary function though, per the Fed itself is "a secondary and temporary source of securities in the Treasury market" - it helped a great deal in the markets after 9/11/2001 to keep them functioning. (Source, about 9/10 of the way through)

In plainer English:
SecLend is short for Securities Lending and is the name for one of the general areas that the Fed operates in. In this sense, securities are only T bonds and T Bills, not stocks.

It's the Fed lending to the 22 or so primary dealers of the Fed - multinationals like Goldman Sachs or JPM or even CountryWide. The interest rate at which they're lent (all lending operations are one day operations) is very low, usually around 1%. It's neither OTC or regular market, since one must be a member of the Federal Reserve System in order to participate.

Their home page is here.

As far as what our SecLend chart on the Fed Watch page is all about, it's our primary chart for estimating what the Fed wants to happen (and it usually succeeds, especially with the larger operations) with interest rates on the short term. The black line is the 10 year interest rate and the green lines measure rate of change (both annual and on a 13 week basis) in actual daily volumes of money involved in the SecLend ops. There's serious money involved every day - the daily average since 2002 is over $2 billion and it's not terribly unusual for it to go over $10 billion.

It's literally one picture of how the Fed manages/affects/controls/manipulates real world interest rates, and shows what they're actually doing as opposed to what they're saying.
"...the Federal Reserve has the capacity to operate in domestic money markets to maintain interest rates at a level consistent with our economic goals” -- Ben Bernanke, Fed Chairman, March 26th 2007 to the Senate Banking Committee.

I think there's probably a thread or two in the "bart" section here too.