Even though it was facing only $2.5 billion in repo expirations, the Fed didn’t roll all of that over, resulting in a $1 billion drain, the fourth drain in a row. After engineering one of the largest reductions of the SOMA on record last Thursday the Fed has brought the 5 day total to a net drain of a shocking $29.5 billion. Click here to download complete report in pdf format (Professional Edition Subscribers). Try the Professional Edition risk free for thirty days. If, within that time you don’t find the information useful, I will give you a full refund. It’s that simple. Click here for more information.
Fed Stays Stingy – WSE Pro
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Lee….something is afoul in Denmark….in spite of your diligent efforts, regarding the SOMA account…total Federal Reserve Credit jumped 20 Billion last week…Taffy pulls, Bill Redemptions…I think Wiley Coyote has given us all the slip again…possibly it is all just a mirage…obviously, no one can verify any of the “numbers”…as we are now trapped in a visual world…forced to accept…just another “proclamation”(digital entry…
You’re right. I need to take a hard look at the numbers and see what I missed, if anything. I suspect this may just be time mismatch, because the redeemed repos don’t settle until the day after the Wednesday statement closing. But that does not explain everything.
OK. The difference is the reduction that came on Thursday, Friday, Monday and Tuesday. Thursday was the biggie, with the $31 billion net drain. That came a day after the Fed’s weekly settlement of its books. So my numbers are correct. I am 5 days ahead of the Fed statement. My numbers for today are current for today. The numbers you are looking at were as of January 2. The Fed has drained $29 billion over the past 5 days.
As always I reconcile the data with the weekly Fed statement every Thursday. As long as I haven’t missed any repos or redemptions, the adjustments are minuscule. But I do reconcile each week, just in case.
While the data can’t be verified, it seems to “work.” Working with it on a daily basis, and comparing it to everything that I follow in the markets, I have no problem with believing that it is as accurate as, or more accurate than any data series of this magnitude. The Fed even lists all of the securities in its account on the NY Fed website.
The money supply data, on the other hand, is completely bogus in my view because of the fictitious capital problem.
Also, I am showing the current level of the SOMA at 802,550. That compares with the 842,300 that I reconciled with the Fed numbers from last Wednesday.
Couple of other interesting datapoints on the last H41. http://www.federalreserve.gov/releases/h41/Current/
Securities held outright were down over $38 billion year to year, which offset the $40 billion TAF add. The rest of the difference was $17 billion in repos, which the Fed made disappear over the past 4 days.
Lee….thanks so much much for your quick response….maybe it’s me…but given the Fed pullback, somehow I would have anticipated a more “severe” response from the markets…other than equities….for example treasuries and “flateners” should be heavier…crude, gold & grains should be heavier…the dollar should be firmer…collateral is actually increasing in many major markets…inspite of the acknowledged implications of the equities//economy..
In due time, I think we will see that. My guess is that it will come later this year.
I really have no expectation that markets should move together. And I definitely have no expectations about how severe a decline should be. I let the market tell me where it’s going, and I try to profit from that.
I don’t think we can deduce anything from the strength in Treasuries when FCBs are still pouring billions into that market week in and week out, and while capital flight out of the CP market and other debt markets is mostly going in to Treasuries. The Treasury market is not a “free” market.
I’m agnostic on the dollar. Could go either way. If it goes up, though, I don’t think it will go up much.
The Fed is not only not the only actor in this drama, it is no longer the most important. That and the fact that liquidity flows where it is most loved, and you get different markets moving in different directions. However, I suspect that the day is not too far off where we see most things moving in unison for a period of time.
Lee….as I look back….the Meriwether trade was a short treasury//long mortgage event….as soon as they blew Brother John out…everybody & their mother put the trade on & big….since Jan of 1999 everyone was short treasuies & long anything against it(that is why the FCB’s have bought all the Treasuries since then)….shortly thereafter,(1999-2002) with this trade as the base…the boys sold dollars & bought everything against it…this was the biggest trade in market history….starting in July//07 the credit spreads(Meriwether trade) startin’ to come undone(the FCB’s are now the sellers of treasuries & the buyers of mortgages)…I fully expect the “other” leg…short dollar///long “assets” to follow on a similiar lag….my overall astonishment is that due to the fact that they all have it on…and the leverage levels are ungodly….and that there are no “pigeons” left to spill to…that any pullback in credit growth…would trigger instant death…another way of saying it…is that the mortgages collateralized every long in the world…equites//commodities/you name it…lastly, if there ever was a true “run” on the dollar…it would first show up in the treasuries…bonds would be down a point a day for a year…like 1979-80…it’s amazing how much money FCB’s have made owning “sovereign” debt…just like the thirties…thanks for your time.