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Treasury Scarcity to Grow as Fed Buys 90% of New Bonds

December 3rd, 2012 | Bloomberg

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.

Even after U.S. public borrowings outstanding grew from less than $9 trillion in 2007 as the U.S. raised cash to pay for spending programs designed to pull the economy out of the worst financial crisis since the Great Depression, rising demand coupled with a drop in net supply means bonds will be scarce.

“The shrinking amount of bonds in the market is lowering rates and not just benefiting the Treasury, but providing lower rates for private-sector decision-makers as well,” Zach Pandl, a senior interest-rate strategist in Minneapolis at Columbia Management Investment Advisers LLC, which oversees $340 billion, said in a Nov. 30 telephone interview. “The Fed is not creating this scarcity to help out the Treasury, it’s primarily to get the economy going.”

Read more @ Bloomberg



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Cyril's picture

Let us FIGHT BACK :

Let us FIGHT BACK :

http://www.dailypaul.com/265358/restore-the-republic-for-500...

DAMN IT.

Peace.

"Cyril" pronounced "see real". I code stuff.

http://Laissez-Faire.Me/Liberty

"To study and not think is a waste. To think and not study is dangerous." -- Confucius

Cyril's picture

Historical Summary of The United States of America, 1913 - 2012

Historical Summary of The United States of America, 1913 - 2012 :

The Boiling Frog

http://en.wikipedia.org/wiki/Boiling_frog

"The boiling frog story is a widespread anecdote describing a frog slowly being boiled alive. The premise is that if a frog is placed in boiling water, it will jump out, but if it is placed in cold water that is slowly heated, it will not perceive the danger and will be cooked to death. The story is often used as a metaphor for the inability of people to react to significant changes that occur gradually. According to contemporary biologists the premise of the story is not literally true; a frog submerged and gradually heated will jump out. However, some 19th-century experiments suggested that the underlying premise is true, provided the heating is sufficiently gradual."

A 100 Year-Long Storytelling Courtesy of :

The Board of Governors of the Federal Reserve System[**]

http://www.federalreserve.gov/aboutthefed/bios/board/default...

[**] sic(k)

"Cyril" pronounced "see real". I code stuff.

http://Laissez-Faire.Me/Liberty

"To study and not think is a waste. To think and not study is dangerous." -- Confucius

makes you wonder

who the suckers are that bought the 10%.

the country is vastly wealthy and is a great military power

the fed will continue to devalue our dollars but is it in their interest to keep the game going as long as possible so they will hurt us but not kill us

Government is supposed to protect our freedom, our property, our privacy, not invade it. Ron Paul 2007

You will know when the end of the dollar is in sight

When we find out the Fed is switching from purchasing bonds to buying Gold. I know it won't be advertised and they will try to hide it by keeping the price of gold low and doing everything possible to keep it quiet, but there are too many people watching gold move around right now. It will get out...and when it does...the FED has tossed in the towel as far as the US Dollar is concerned.

Great idea! Bernanke is on Dr. Evil's "Good list" this Xmas.

Great idea! Bernanke is on Dr. Evil's "Good list" this Xmas.

Demand is high for safe bonds right now, so this will force even more money into ricky stocks, pumping the stock market and giving even more appearance of a recovery.

At the same time, ALL government obligations will be met through the Fed's printing presses, which will satisfy the dirty masses out there.

EVERYONE's HAPPY!

Ehh... except for those of us who realise this is the lemming's path to certain death that's been trodden by virtually every other nation in recent history, EXCEPt for the united states....

"Cowards & idiots can come along for the ride but they gotta sit in the back seat!"

Sound Like...

...the FED is positioning itself to take physical ownership of huge chunks of private and public real estate, capital, and other forms of collateral as soon as debts are defaulted on. Americans will become landless serfs to their new overlords.

You know your system is bankrupt

when they are MONETIZING THE DEBT.

_________________________________

Freedom - Peace - Prosperity

Cyril's picture

BUMP for HYPER-REALISM

BUMP for HYPER-REALISM

"Cyril" pronounced "see real". I code stuff.

http://Laissez-Faire.Me/Liberty

"To study and not think is a waste. To think and not study is dangerous." -- Confucius