We have beaten this topic to death [5]so we won't say much more, suffice to say the chart below shows what is the key issue: too much monetization and it's game over for the reserve currency; too little and it's an uncontrolled market sell off, and with every passing week the margin for error gets less and less.
Last week the Fed owned $1.663 trillion in ten year equivalents, or 31.59% of total
This week the Fed owned $1.678 trillion in ten year equivalents, or 31.89% of total
In other words, the Fed's holdings of the Treasury market, expressed though the correct 10 Year equivalent basis not the completely wrong total notional, rose by a whopping 0.3% in one week!
Annualize that (especially without a taper) to understand just how cornered the Fed now is (especially with the TBAC already complaining non-stop about lack of Treasury liquidity and eligible private-sector collateral).
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1 comment:
This is another form of stealing from the public. Let me explain...
Tons of investments are REQUIRED BY LAW to be in US Treasuries.
When the Treasury buys up this much of the market, they increase prices. Higher prices equate to a lower bond yield.
So those required purchases are stuck paying more than the true value of the treasuries, and they realize a lower level of return. This makes the investment worth less than it should be.
Tha game is rigged! And to think that most people still think that markets are efficient.
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