In order to ensure that everyone sees this, I thought I should give it a dedicated thread.
The full article, posted by Bloomberg at 4:20 am EST today, is linked below. Here are the two, opening paragraphs. Please read and consider:
Even as U.S. government debt swells to more than $16 trillion, Treasuries and other dollar fixed- income securities will be in short supply next year as the Federal Reserve soaks up almost all the net new bonds.
The government will reduce net sales by $250 billion from the $1.2 trillion of bills, notes and bonds issued in fiscal 2012 ended Sept. 30, a survey of 18 primary dealers found. At the same time, the Fed, in its efforts to boost growth, will add about $45 billion of Treasuries a month to the $40 billion in mortgage debt it’s purchasing, effectively absorbing about 90 percent of net new dollar-denominated fixed-income assets, according to JPMorgan Chase & Co.
Note the certainty and matter-of-fact quality of the writing. To quote: "...the Fed, in its efforts to boost growth, will add about $45 billion of Treasuries a month to the $40 billion in MBS it's purchasing..."
Will add.
Will.
Did I miss something? When was this formally announced? Of course, I've tried to tell you that this was coming. I did so as early as September 18: https://www.tfmetalsreport.com/blog/4202/brass-tacks. But so far, this had all been speculation. We know that Operation Twist will end this month when The Fed runs out of short-term maturities to swap for long-term securities but we've yet to see the formal announcement that The Fed would continue with Twist's $45B/month, thereby making QE∞ $85B/month. However, here it is in print, from Bloomberg, via The Fed's own Primary Dealers.
Now some of the statements of the article are totally bogus, like the claim that the deficit will fall and the U.S. government will only need to borrow an additional $950B in fiscal 2013. This is complete nonsense as we know that they already had to borrow $120B in October 2012 alone, UP from $98B in October 2011. Regardless, the main point is the bald-faced quality of the opening paragraphs. QE at a minimum of $85B/month is a done deal. The official announcement from The Bernank will certainly be forthcoming.
https://www.bloomberg.com/news/2012-12-03/treasury-scarcity-to-grow-as-fed-buys-90-of-new-bonds.html
And remember, the charade of $40B in MBS and $45B in Treasuries is just that...a charade. It's all Treasuries, it's just that some are bought directly by The Fed and and some are bought on behalf of The Fed, by the PDs. The Fed buys $40B/month of mortgage backed securities (MBS) from the Primary Dealers. The PDs, in turn, take those funds and buy Treasuries. It's as simple as that. $1,020,000,000,000 in "Fed Cash" to fund the U.S. government deficit for fiscal 2013.
Have you added to your stack today??
TF
