The Fed buys the paper from Primary Dealers. The dealers act as middlemen or straw men, acting on behalf of the Fed.
Yesterday we left with a couple of the intraday cycle projections pointing to around 3440 on the ES fucutures. Well here were are in the wee hourse, and voila! Done!
Will it still be there in 5 hours or so when NY opens? Stay tuned.
Is it a breakout or a blowoff top? The 5 day cycle projection is 3435. Hey, they can count.
The Fed bought $1.73 billion in Treasury coupons from Primary Dealers today. There’s more to the story.
The Fed buys the paper from Primary Dealers. The dealers act as middlemen or straw men, acting on behalf of the Fed. The dealers purchase newly issued bills notes or bonds from the US Treasury. They in turn sell that paper to the Fed with a markup. That markup is their skim.
The money that the Fed deposits in payment is then their cash to use for trading whatever they want. Usually that includes a big slug of equities, in addition to Treasuries and whatever else they make markets in.
Here’s what they did yesterday.
I have this weird feeling like we’ve been here before.
I can’t quite put my finger on it.
That was yesterday’s lesson. Here’s today’s.
The kerplunk herd round the world.
$3.601B Treasury Coupon Purchase 2020-08-20
This does not include the final settlement of previous forward MBS purchase contracts, which is material because today was the last MBS settlement for August.
5 day cycle projection 3412.
