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I have to expose your thread ProfEmeritus as "NOT TRUE".
Across the Curve
A daily bond market chronicle
Disinformation in the Blogosphere: Chris Martenson Responds
August 8th, 2009 2:43 pm | by John Jansen |
Late Thursday evening I pennned a piece which responded to a post at the blog Zero Hedge which had originally been written and posted at the blog of blogger Chris Martenson.The piece by Mr Martenson discussed the most recent 7 year note auction and the subsequent Open Market Desk purchase of nearly $ 5 billion of those bonds while the ink han not yest dried on that bond.
Mr Martenson posted a response to my post in the comments section of that post. It is well written and I think that more eyes will have a chance to read his thoughts here rather than in the comments section.
Here is his response in its entirety:
Hello, Chris Martenson here.
[Note: I left a similar comment at Naked Capitalism]
Just wanted to say that while I applaud the interest in this subject, and I am in awe of the knowledge on display here, I believe that some of my words and intent have been taken out of context or misinterpreted.
1) My only point in raising the specific 7-year CUSIP purchase by the Fed last week was in the context of the troubled 5-year auction being followed by a miraculous 7-year auction that now appears less-than-miraculous due to that fact that the fed took 47% of the Primary Dealer take off their hands a few days later. Yes, that’s a dot-connection that seems entirely relevant to me not because it reveals a greater degree of manipulation (the $1.25 trillion MBS target seems a tad larger to me…) but because it possibly reveals that there’s rebellion brewing in the Treasury auction world. While this may be over-reaching, it could also be legitimate spoor to be read as we try and illuminate some of the path before us. I was not, repeat not, making any overt claims about the extent of monetization in my post, just that one odd coincidence concerning the 7-year auction. I do collect and have all the base data for all the auctions and I track them closely and the Fed is very much on track with what it said it was going to do so there’s not much of genuine interest there for me yet. But stepping in to assure a “good appearance” at a critical auction. I consider that quite interesting and newsworthy.
2) My comment about “A more honest and open approach…” for the Fed to pursue, as my long-time readers will attest, was not a comment about what is legally permissible by the 1913 FR Act (yes, I’ve read the whole thing) or normal operating procedure (yes, I know how the Fed & Treasury operate) but rather just another statement about another way that complexity obscures our official monetary and fiscal actions. I regularly opine that we would be better off by being more straightforward in our official reporting and actions. I honestly didn’t know that this piece, out of the thousands that I have written, would catch a bit of internet-lightening and so I wrote a quick piece with my usual audience in mind. In retrospect I wish I would have framed that sentence a bit more because it is now being bandied about as proof that I don’t know how the Fed actually operates and, therefore, the rest of the piece (and maybe more!) is bunk as well. Ah well, such is life on the intertubes.
So that’s it, I think it smells that the 7-year auction seemingly went so well the day after the 5-year fiasco and then days later we find out that the Fed bought nearly half of the total load carried by the Primary dealers.
Perhaps it’s just a quirk in the largest bond auction week in history, or perhaps it portends a dangerous shift in Treasury appetite and is a sign that the greatest bubble of them all (Treasuries) has a small tear developing at the edge. I will continue to track the edges of this fascinating story because I personally don’t want to be in the position of someday reading about it above the fold in the NYT with everybody else.
Title: China's massive holdings of U.S. Treasury bonds began to stop sending letters: BBS side of the space station (Tue Aug 18 10:54:46 2009, the United States and East)
According to the U.S. Treasury Department data released on the 17th, as at 6 at the end of China's holdings of U.S. government bonds 776,400,000,000 U.S. dollars, in May, compared to 801.5 billion U.S. dollars of holdings, a decrease of 25.1 billion U.S. dollars, to reduce by more than 3%. This is also the first time in the past year, China's large-scale reduction of U.S. Treasury bonds.
It is worth noting that the reduction in China, the United States government bonds held by the country's second-largest in Japan, a substantial holdings in June 34.6-711.8 billion U.S. dollars, "one by one by," with China to further reduce the holdings. The United Kingdom as the country's third-largest holding, in May from 163.8 billion U.S. dollars of holdings to 6 at the end of the 214 billion U.S. dollars, increasing 50.2 billion U.S. dollars, an increase of more than 30.6%.
China in April this year has been 4.4 billion U.S. dollars of U.S. Treasury holdings to float downward.(JIANG Rui Fang Yao both)
According to the data published by the US Treasury Department on August 17, by the end of June, China's holdings of US Treasury Bonds (T-bonds) totaled 776.4 billion USD, down 25.1 billion, or 3.13 percent compared with the country's 801.5 billion USD T-bonds holdings in May, indicating China's first massive offload of US debt in 2009.
Japan, the second biggest holder of US T-bonds has purchased 34.6 billion USD of US T-bonds in June, adding its total US T-bonds holdings to 711.8 billion USD. The UK, US debt's third biggest holder, holds 214 billion USD T-bonds by the end of June, up 50.2 billion, or 30.6 percent compared to its 163.8 billion USD of US debt holdings in May.
China has offloaded 4.4 billion USD of US T-bonds in April and increased its holdings by 38 billion USD in May.
Originally posted by redhatty
reply to post by ProfEmeritus
Sorry Prof, it's actually the other way around, they are dumping long term T's and buying shorter term T's.
The article groups Bonds and Notes together in one accounting, not separate.
They are worried that we won't be able to pay at all in 30 yrs.
And, they have redeemed much of the bills they have been holding, rather than roll them over, which is why the #'s have decreased
Originally posted by Zosynspiracy
The rest of the world is at their wits end financially. If we go so goes the rest of the world in all honesty.
And if we start to go don't think for a second our government would not invade and take what they/we need to survive.
Foreign countries are powerless to stop our debt based monetary system that allows the US government ungodly amounts of power and manipulation
May - 3293.1
June - 3382.4
May - 586.2
June - 571.7
T-Bonds & Notes:
May - 1701.3
June - 1723.8
Total monthly foreign investment flows were down $31.2 billion in June, compared with sales of $65.7 billion in May. Link
Aug. 19 (Bloomberg) -- Pacific Investment Management Co., which runs the world’s biggest bond fund, said the dollar will weaken as the U.S. pumps “massive” amounts of money into the economy.
The dollar will drop the most against emerging-market counterparts, Curtis A. Mewbourne, a Pimco portfolio manager, wrote in a report on the company’s Web site. The greenback is losing its status as the world’s reserve currency, he said.
“Investors should consider whether it makes sense to take advantage of any periods of U.S. dollar strength to diversify their currency exposure,” Mewbourne wrote in his August Emerging Markets Watch report. “The massive amounts of U.S. dollar liquidity produced in response to the crisis” have helped reduce demand for the currency, he wrote.
The Dollar Index, which tracks the greenback against a basket of currencies, touched 78.823 today, the lowest this week. It has fallen 12 percent from this year’s high in March as U.S. authorities pledged $12.8 trillion to combat the recession. China, the world’s largest holder of foreign-currency reserves, and Russia have both called for a new global currency to replace the dollar as the dominant place to store reserves.
“While we have not yet reached the point where a new global reserve currency will arise, we are clearly seeing a loss of status for the U.S. dollar as a store of value even in the absence of a single viable alternative,” Mewbourne wrote.
The U.S. government boosted spending and the Federal Reserve bought bonds to revive credit markets that seized up after financial companies posted $1.6 trillion in writedowns and losses, raising concern there is an oversupply of greenbacks.