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Beldar Fed to Consume Mass Quantities! It Better Work

Beldar, the ConeFed now says that it will consume mass quantities of Treasuries, MBS, and now Commercial MBS.


Liquidity moves markets!

Follow the money. Find the profits! 

Now that businesses realize that employees can work from home, and that they don’t need to pay rent on billions of square feet of office and retail space, what do you think they’ll do?

The Fed said it will also buy unlimited quantities of Treasuries and Agency MBS from Primary Dealers. But dealers are busted. What if they don’t redeploy the cash into other asset purchases or more Treasuries. What if they use it to pay of off of their trillions in debt?

We knew this was coming. The Fed has to finance the $2 trillion econonmic rescue borrowing. The market can’t do it. So the Fed must print the money to buy it.

This all in gamble better work. Because if it doesn’t, there’s nothing else.

A couple weeks ago I wrote that the Fed would end up owning everything. Now it appears that that’s no pipedream. The question is what it will be worth when no one wants to buy it back and there’s no market.

Forget about this kneejerk short covering rally this morning. Once the shortcovering is exhausted, who will then buy?

We’re doomed. There will be chaos.

Fed Statement:

Effective March 23, 2020, the Federal Open Market Committee (FOMC) directed the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York to increase the System Open Market Account (SOMA) holdings of Treasury securities and agency mortgage-backed securities (MBS) in the amounts needed to support the smooth functioning of markets for Treasury securities and agency MBS.  The FOMC also directed the Desk to purchase agency commercial mortgage-backed securities (CMBS).

Consistent with this directive, the Desk has updated its plans regarding purchases of Treasury securities and agency MBS during the week of March 23, 2020.  Specifically, the Desk plans to conduct operations totaling approximately $75 billion of Treasury securities and approximately $50 billion of agency MBS each business day this week, subject to reasonable prices.  The Desk will begin agency CMBS purchases this week.

The Desk stands ready to adjust the size and composition of its purchase operations as appropriate to support the smooth functioning of the Treasury, agency MBS, and agency CMBS markets.

Detailed information on the purchase schedules for Treasury securities and agency MBS can be found on the Treasury Securities Operational Details and Agency MBS Operation Schedule pages, respectively.  Additional details on eligible securities and the overall size and scope of agency CMBS purchases will be released in coming days.

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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. 

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