Support the Wall Street Examiner! Choose your level of support to receive a free proprietary report as my thanks. Click the button below to see your options. Become a Patron!

Fed Finally Settles First Round Of MBS Offsetting Other Negatives in Liquidity

Liquidity indications were neutral this week, thanks to ongoing panic inflows of cash from Europe, as well as the fact that the Fed finally started settling the MBS purchase commitments that have been building up, but had gone unsettled since October. These positive flows offset the negatives of bank and FCB selling of Treasuries.

The Fed had previously reported that it had purchased $41 billion worth of MBS due for settlement in December. Net MBS settlements last week, after any MBS paydowns, totaled $31 billion, so the Fed settled the greater part of the purchases scheduled for December, or perhaps all of them. This begins to fill the hole that the Fed had been digging in its balance sheet as a result of the delayed purchases. However, the total size of the Fed’s System Open Market Account remains below its stated target, even after the settlement of these purchases and $53 billion of currency swaps with other central banks.

It’s not possible to know specifically the gross amount of MBS purchases settled in a given week. The paydowns and purchases are reported as a single line item. While the Fed publishes how much is due for settlement each month, it does not publish the weekly amounts. It does appear however that the settlements were scheduled to coincide with the big mid month Treasury issuance, helping the Primary Dealers to absorb the new supply.

This was help that it turns out they did not need, given the Treasury buying panic coming out of Europe, the effects of which I discussed in the Treasury update titled The Last Ponzi Game, posted last Friday.

Get the full sized chart with analysis in the Professional Edition Click here to download complete report in pdf format (Professional Edition Subscribers) including 94 pages of charts, historical background, and clear, cutting edge analysis that you can use to gain an edge in the market. 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. 30 day risk free trial for new subscribers. Click here for more information.

3 month subscription to the Wall Street Examiner Professional Edition, Money-Liquidity-Real Estate package, renewing automatically unless canceled.

Price: $89.00

By clicking this button, I agree to the Wall Street Examiner’s Terms of Use.

Stay up to date with the machinations of the Fed, Treasury, Primary Dealers and foreign central banks in the US market, along with regular updates of the US housing market, in the Fed Report in the Professional Edition, Money Liquidity, and Real Estate Package. Try it risk free for 30 days. Don’t miss another day. Get the research and analysis you need to understand these critical forces. Be prepared. Stay ahead of the herd. Click this link and begin your risk free trial NOW!

Enter your email address in the form to receive email notification when Professional Edition reports are posted.

Try Lee Adler's Technical Trader risk free for 90 days! Follow the money. Find the profits!

Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish, 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. 


Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.