Thursday’s Treasury auctions again showed minor cracks in the façade with a weak indirect bid on the 30 year bond and a smaller indirect bid on the CMB than on last week’s CMB auction. The Treasury announced next week’s schedule, and it appears that new supply next week will be around $30 billion, up from just $1 billion this week. The light calendar of new supply this week helped to put a bid under stock prices. Next week there will be a little more pressure.
The Fed released its H41 report after the close, along with data on Commercial Paper and Primary Dealer holdings. Apparently the Fed is still doing its utmost to sterilize the bailout programs, but this week it appears that they added net cash of about $20 billion to the system. That was only enough to offset what looks like a similar amount drained last week. The flood of money printing that has been predicted by some isn’t happening yet. Until it does, any rally in the stock market should be short lived.
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