The Fed drained $1.5 billion from the liquidity pool on Wednesday, adding $2.5 billion in overnight repos against expirations of $4 billion. The only area evidencing any pressure is the money market where money rates are ticking slightly higher. The stock and bond markets’ buoyancy is even more surprising in view of the fact that FCBs cut $6 billion from their 3 year note rollover. They made up less than $3.9 billion of at today’s 10 year note auction. Primary dealers have cut way back on their shorting of bonds as the market is readily absorbing the new supply. Click here to download complete report in pdf format (Professional Edition Subscribers).
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