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Massive POMO Faces Light Treasury Supply In April

The markets surprised me by holding up well around Thursday’s settlement of $61 billion in net new Treasury supply. Either stocks or bonds should have felt some liquidation pressure. The reason they didn’t appears to be that Japan came back to the Treasury auctions and supplied enough cash on top of POMO to keep the game intact. There may be a delayed reaction on Monday, but the conditions for the balance of the month appear ripe for more rally.

The next several weeks will be a period of very light net new Treasury supply, thanks to tax collections and to the expiration of $50 billion in cash management bills that were floated in late February. That cash will fund much of the new paper. As it stands now, the market should not face any significant net new supply until the beginning of May. And the Fed isn’t going to stop pumping just because there’s no new Treasury supply.

I have been suspicious lately about the impact of all the BoJ money pumping in the past few weeks. It now looks as though I will have to add BoJ operations to my already overflowing plate. There’s a learning curve involved in getting a rudimentary handle on the BoJs operations, and there’s much data to crunch. The first thing that I have learned that hit me like a brick was that the BoJ conducts regular, large US dollar operations. Since they are dealing with the same gang of criminals that the Fed deals with, those operations have a direct impact on US markets.

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Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish LiquidityTrader.com, and was lead analyst for Sure Money Investor, of blessed memory. I developed David Stockman's Contra Corner for Mr. Stockman. I’ve had a wide variety of finance related jobs since 1972, including a stint on Wall Street in both sales, analytical, and trading capacities. Prior to starting the Wall Street Examiner I was a commercial real estate appraiser in Florida for 15 years. I was considered an expert in the analysis of failed properties that ended up in the hands of bank REO divisions, the FDIC, and the RTC. Remember those guys? I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. I'm not some Ivory Tower academic, Wall Street guy. My perspective comes from having my boots on the ground and in the trenches, as a real estate broker, mortgage broker, trader, account rep, and analyst. I've watched most of the games these Wall Street wiseguys play from right up close. I know the drill from my 55 years of paying attention. And I'm happy to share that experience with you, right here. 

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