Treasuries Fall as Central Banks Seek to Ease Credit Concerns

[Sapiens]

http://www.bloomberg.com/apps/news?p...Ukk&refer=home

“Dec. 12 (Bloomberg) — Treasuries tumbled after the Federal Reserve said it will stem a surge in borrowing costs by adding cash to banks through auctions and providing $24 billion in currency swap lines to European central banks.”

[snip]

“The Fed is coordinating the measures with the European Central Bank, Bank of England, Bank of Canada and Swiss National Bank, the Fed said in a statement in Washington. The Fed will auction term funds to banks against a “wide variety of collateral.” All “generally sound” institutions can participate, the Fed said in a statement. ”

Treasury investors are not selling, it's the Fed monetizing. The Central Banks are really desperate.

[metalman]

Re: Treasuries Fall as Central Banks Seek to Ease Credit Concerns

http://www.bloomberg.com/apps/news?p...Ukk&refer=home



Treasury investors are not selling, it's the Fed monetizing. The Central Banks are really desperate.

if the fire econ banking system is f*cked, isn't it obvious that the only way to keep the system from crashing is for the fed to print the difference?

ej posted this elsewhere...

http://www.itulip.com/images/creditmktQ307.gif

commercial paper from pos $400 billion to neg $900 in one quarter? all sectors loans from usual few billion to nearly a trillion in one quarter? these are the flows numbers, not levels. i checked. wtf?

[dbarberic]

Re: Treasuries Fall as Central Banks Seek to Ease Credit Concerns

http://www.bloomberg.com/apps/news?p...Ukk&refer=home



Treasury investors are not selling, it's the Fed monetizing. The Central Banks are really desperate.

This sounds exactly like this:


The Fed will now loan against a "wide variety of collateral". Moving items from the Not Allowed to the Allowed side.....

[jk]

Re: Treasuries Fall as Central Banks Seek to Ease Credit Concerns

abcp [asset backed commercial paper] was a big deal, now dead.

[Guest]

Re: Treasuries Fall as Central Banks Seek to Ease Credit Concerns

And right on cue, here comes da 'flation. It's like a symphony, all the parts playing so beautifully together?

ECONOMIC REPORT

Import prices rise 2.7%, the most in 17 years
Nonfuel import prices rise 0.5% because of higher commodities prices

http://www.marketwatch.com/news/stor...%7D&siteid=bnb

[SeanO]

Re: Treasuries Fall as Central Banks Seek to Ease Credit Concerns

Caught this over at Inman News. If correct this is much larger than per the Bloomberg story that started this thread.

Five central banks to provide $90 billion in liquidity
U.S., other countries grapple with credit crisis

Wednesday, December 12, 2007

Inman News

In a joint effort to relieve fears about deteriorating credit markets, the Federal Reserve and four other central banks said today they will inject more than $90 billion in liquidity into financial markets in coming weeks.

In the U.S., the Fed said it will make up to $40 billion available to commercial banks in auctions to be held Dec. 17 and Dec. 20. Additional auctions will be held Jan. 14 and Jan. 28, with amounts to be determined.
....

[Spartacus]

THAT is the Ben Bernanke that we know & love

Also - why, oh WHY do other central banks need lines of credit from the US FED?

I'm extremely suspicious/paranoid.

Remember Mervyn King's comment during the Northern Rock incident that he would prefer to do everything privately and secretly?

Match this up with Aaron Krowne's comments on how suspicious it is that several banks outside the US have died because of US subprime problems, but no US bank has.

Seems to me the European CBs are going to use the US FED to hide their actions.

[santafe2]

Re: Treasuries Fall as Central Banks Seek to Ease Credit Concerns

Quoting Bloomberg - "Treasuries tumbled after the Federal Reserve said it will stem a surge in borrowing costs by adding cash to banks through auctions and providing $24 billion in currency swap lines to European central banks."

I had commented the other day on another tread that the US press is useless. I apologize here and retract that contention as the statement itself is reactive and has little instructive use. Let me restate: The US press has a use, but like Jim Cramer and Abby Joseph Cohen our press should be used as an anti-truth litmus test. Not ill-truth, un-truth or non-truth - anti-truth.

The first two words of this article are only accurate in the most nano-narrow sense possible. "Treasuries tumbled..." There is no space in which this statement would be true. The follow-on, completely out-of-context statement is given a no-memory-of-the-previous-day/week/month causality.

BECAUSE

Come on, please, excuse me, are they kidding?! I bust my 6 year old for this sort of loose liar-in-training language and Bloomberg is paying someone to write this stuff. Their career should have tumbled.

US Treasuries are experiencing a serious bull market. I'm not recommending anyone invest here, it might be over, just pointing out that this is the strongest move treasuries have made in four years. Too bad they "tumbled" today. I suppose that negates everything that's happened in the last six months.

My chart of the 10 year note is attached below. You don't have to be a technician to see that treasuries have been the great beneficiary of the scary mortgage monster. The villagers may have their torches lit and their pitchforks in hand, but they're chasing the real estate bubble Frankenstein and putting their coins in the UST mattress until he's been killed.

From the Boris Karloff 1931 film: "Look! It's moving. It's alive. It's alive... It's alive, it's moving, it's alive, it's alive, it's alive, it's alive, IT'S ALIVE!"

http://stockcharts.com/h-sc/ui?s=$TNX&p=W&yr=5&mn=0&dy=0&id=p27783519679&a=107726316&listNum=2&listNum=2

[Chris Coles]

Re: Treasuries Fall as Central Banks Seek to Ease Credit Concerns

It Will Not Work.

Link to the Fed announcement below and then link again to the Bank of England remembering that this paragraph

"The Federal Open Market Committee has authorized temporary reciprocal currency arrangements (swap lines) with the European Central Bank (ECB) and the Swiss National Bank (SNB). These arrangements will provide dollars in amounts of up to $20 billion and $4 billion to the ECB and the SNB, respectively, for use in their jurisdictions. The FOMC approved these swap lines for a period of up to six months."

is just above the BoE link.

Federal Reserve and other central banks announce measures designed to address elevated pressures in short-term funding markets

Released by the Board of Governors of the Federal Reserve System

http://www.bankofengland.co.uk/publi...s/2007/158.htm

And you will find the Bank of England statement:

News Release
Central Bank Measures to Address Elevated Pressures in Short-term Funding Markets
12 December 2007
Today, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, and the Swiss National Bank are announcing measures designed to address elevated pressures in short-term funding markets.
Bank of England Actions
The Bank of England has already scheduled long-term repo open market operations (OMOs) on 18 December and 15 January. In those operations reserves will, as usual, be offered at 3, 6, 9 and 12-month maturities against the Bank’s published list of eligible collateral. But the total amount of reserves offered at the 3-month maturity will be expanded and the range of collateral accepted for funds advanced at this maturity will be widened.
The total size of reserves offered in the operations on 18 December and on 15 January will be raised from £2.85 billion to £11.35 billion, of which £10bn will be offered at the 3-month maturity.
The Bank will accept a wider range of high quality securities as collateral against funds advanced at the 3-month maturity. The additional categories of eligible collateral are:

• Bonds issued by sovereigns rated Aa3/AA- or above (in addition to those currently eligible), subject to settlement constraints.
• Bonds issued by G10 government agencies guaranteed by national governments, rated AAA.
• Conventional debt security issues of the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Corporation and the Federal Home Loan Banking system, rated AAA.
• AAA-rated tranches of UK, US and EEA asset-backed securities (ABS) backed by credit cards; and AAA-rated tranches of UK and EEA prime residential mortgage-backed securities (RMBS).
• Covered bonds rated AAA.

Securities must be denominated in sterling, euro, US dollars, Australian dollars, Canadian dollars, Swedish krona, Swiss francs, and, in the case of Japanese Government Bonds only, yen; and must be capable of being delivered via a settlement channel specified by the Bank.
There will be no further changes to the scheduled operations on 18 December and 15 January. As usual, those eligible to bid in the operations will be the Bank’s OMO counterparties and the operations will be conducted as variable rate tenders with funds offered to successful bidders at the rate(s) that they tender.
Consistent with the Bank’s objective of keeping overnight market interest rates in line with Bank Rate, the Bank intends to offset the additional reserves taken up in the long-term repo operations in December and January in its other operations.
The Bank will review whether to make any changes to operations scheduled after January in the light of market conditions at the time.
The Bank will announce further operational details, including details of collateral and settlement arrangements, in a Market Notice on Friday 14 December.
Information on related actions being taken by other Central Banks
Information on the actions that will be taken by other central banks is available at the following websites.
Bank of Canada
European Central Bank
Federal Reserve System
Swiss National Bank
Statements by Other Central Banks
Bank of Japan
Swedish Riksbank


Let us debate this. Place yourself as a business into this mix and think about the consequences of your actions if you were a bank in trouble.

Your balance sheet is stuck fast, has been since last August 8th.

You have on your hands a large pile of dodgy collateral that no one else wants to purchase from you so you cannot move your stock. This is the important thing. No One Will Buy Your Dodgy Stock. Everybody has dodgy stock on their hands. So, the accountants have come in and said to you, you cannot use the dodgy collateral, you have to write it off on your books.

That means your AAA capital base is the only thing keeping the bailiffs at bay and no one wants to deal in their AAA collateral.

Now, an outsider, the Central Bank then says to you, give me some of the AAA capital base and I will sell you 1 months money. Thats right, for one month. But that money, Cash, if you like is the same thing as AAA collateral. If anything goes wrong with your operation during that month, THAT cash is also locked into the dodgy vault too.

The banks that will gain the most are those with the least to fear from the process. Those with the greatest exposure will be the least to benefit form this exercise.

Final questions:

Why is the Bank of England the only one not listed on the Fed web site as receiving funds from the Fed?

Is the answer because the Bank of England is planning to issue Sterling instead of dollars?

If the AAA dollar collateral of the US banks is swapped for Sterling, what is the long term implications for stability of the dollar?

[c1ue]

Re: Treasuries Fall as Central Banks Seek to Ease Credit Concerns

Why is the Bank of England the only one not listed on the Fed web site as receiving funds from the Fed?

Is the answer because the Bank of England is planning to issue Sterling instead of dollars?

It could be that, or it could be that England also has its large pile of stinky subprime/MBS/CDOs to somehow de-toxify.

The wonderous benefits of the NY/London financial centers of the world are now being seen.

[Chris Coles]

Re: Treasuries Fall as Central Banks Seek to Ease Credit Concerns

It could be that, or it could be that England also has its large pile of stinky subprime/MBS/CDOs to somehow de-toxify.

The wonderous benefits of the NY/London financial centers of the world are now being seen.

It seems to me that there is a major difference between the news from the Fed and the news from the BBC. The Fed says $60 billion. The BBC is today saying $110 billion

http://news.bbc.co.uk/1/hi/business/7141632.stm

Is this the first stage of the replacement of the dollar as a reserve currency with good old Sterling?

[c1ue]

Re: Treasuries Fall as Central Banks Seek to Ease Credit Concerns

Is this the first stage of the replacement of the dollar as a reserve currency with good old Sterling?

My read is that the changing amounts is a combination of interpretation of what the agreement was, plus possibly some fudging of numbers after the initial reception was received like a lead balloon.

As for Sterling being a reserve currency, I don't think England is in so much better shape than the US economically.

A lot of England's recent prosperity was equally the result of financial activities plus real estate.

With the collapse of the two, it cannot bode well for the UK economy nor in turn for Sterling.