The Fed did a coupon purchase today and the maturities were very long—out to 30 years. The Fed got nervous when they saw the results of last week’s 30 year bond auction. Primary dealers are already loaded to the gills with long term Treasuries and they are taking heavy losses as a result. This morning’s announcement that the Fed would be buying the long end resulted in a big increase in the price (lowering of yields) of these bonds, giving the PDs some breathing room and an opportunity to unload some of their paper.
This is about as blatant as market manipulation can get. Once again, the Fed is bailing the primary dealers out from their own stupidity. If this isn’t moral hazard, what is? The corruption of this crony capitalism is shocking in its boldness. Yet no one seems to be paying attention. As long as the stock market rallies, everyone is happy and hopeful. It’s disgusting. 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.