As usual, straight from the bowels of the NY Fed, bought from Primary Dealers yesterday and settling today.
$1.732B Coupon Purchase 2020-09-24 – NYFed treasury securities operations
Liquidity moves markets!Follow the money. Find the profits!
This is part of the Fed’s committment to buy $80 billion per month of Treasury paper from Primary Dealers, paying for the purchases by crediting the dealers’ checking/trading accounts at the Fed with newly imagined moolah.
The Fed says it will buy another $8 billion or so today, and about $1.75 billion on Monday. It will post the purchase schedule for the next two weeks also on Monday, but you can count on it averaging around $20 billion a week.
The Fed also buys around $80 billion a month or so of MBS from the dealers, but those are forward contracts which the Fed settles with them only in the third week of every month. We’re in a dry spell right now.
Meanwhile the market must absorb a shitload of Treasuries here at the end of the month without much help from In the Name of Jaysus! Praise the Load. Of fresh cash that’s coming in mid October. Not soon enough.
For more background on this nonsense here’s a post I wrote earlier this week.
And for an in depth analysis, outlook, pretty charts, and a suggestion or two on how to trade or strategize around this crap, check out Liquidity Trader. I’ll post a weekly QE update and outlook later today. Meanwhile here’s my latest look at the macro liquidity factors that drive the stock market.
Composite liquidity continues to rise, but at a slower pace than in the second quarter as the Fed has slowed QE. That reduces the cash flowing into Primary Dealer accounts, which in turn contributes to a slowing in secondary liquidity drivers.
“Slowing” is a relative word, however. Historically, the numbers remain gargantuan.
No, something else is holding the market back. Here’s what that something is, and what we’re going to do about it.
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