Fed Money Pump Update

Happy MLK Day! As my long term charts have not produced anything salient I spent the day crunching some updated numbers I extracted from the New York Fed’s Open Market Operations page. The last time we talked about POMO auctions was in late October 2011 – more than a year ago! Since then the Fed’s repo activities have been relatively muted but seem to be picking up steam again in recent weeks:

It’s a big one so you may want to click on the chart to catch more context. Shown here is the 20-day rolling total of Permanent Open Market Operations (POMO), total par accepted, and in Billions. This gives us a more directional plot as there’s a focus on recent activities. Clearly visible are the QE1 spike in 2009 and the QE2 spike in 201 as the Fed was conducting purchases of treasury and agency debt, thus injecting money into banks in exchange of (less than stellar) debt instruments.

As you can see during the past year the rolling total has been swinging around the zero mark, which is due to a shift toward Operation Twist, an effort to affect the treasury yield curve via the purchase of longer term debt and selling short term paper. In theory both actions are supposed to offset each other but as they are done on different days it obviously had an effect on how stock prices were responding to additional liquidity. Throughout 2012 we saw deeper corrections but obviously the trend continues upwards which indicates that the Fed is using additional measures to inject liquidity into the banking system.

Here’s the running total – truth to be told I had to tweak the numbers as my data was only going back a few years. I do recall that the Fed reached the $1 Trillion mark in late December of 2010, so I was extrapolating based on that. Again we peaked around August 2011 and it’s been sideways since. However, most noteworthy is the little pick up lately, which correlates nicely with the recent run up in equities. Coincidence? I think not ;-)

I literally spent all day formatting the imported data, adding missing days, removing weekends, adding up double auctions, etc. Suffice to say I’m not a big with Excel but I somehow managed – Google is your friend. I promise to keep a close eye on this one again moving forward, in particular if I see more pertinent activities. By the way – this little tidbit posted on January 15th raised my eyebrows, but as the old saying goes: Don’t listen to what they say – pay attention to what they do.

Cheers,

This entry was posted on Monday, January 21st, 2013 at 6:09 pm. Both comments and pings are currently closed.



  • Th3_Acist

    Epic charts!

  • newbfxtrader

    The most interesting part is the huge spikes DOWN in 2008 before the crash. 

  • Th3_Acist

    Anyone else see USD/CHF getting rejected on the weekly NLBL?

  • ridingwaves

    Thanks Mole…good stuff….

  • newbfxtrader

    Looks kind of bullish on a 1yr daily chart. I wouldnt short it.

  • BobbyLow

    I love the term Obfuscate especially as it pertains to the Federal Reserve.  Just think back to Greenspan and his explanations of what the Fed was doing.  In recent years it has been Bernanke and it was just like switching hands and not missing a stroke.  :)

    ob·fus·cate
      
    [ob-fuh-skeyt, ob-fuhs-keyt]  Show IPAverb (used with object), ob·fus·cat·ed, ob·fus·cat·ing.

    1.to confuse, bewilder, or stupefy.
    2.to make obscure or unclear: to obfuscate a problem withextraneous information.
    3.to darken.

    http://dictionary.reference.com/browse/obfuscation

  • ridingwaves

    yeah BobbyLow, congress probably wanted to call the fed “Obfuscate bank” but found out it was taken via one of their “pages” looking at the encyclopedia Brittanica, since they were all drunk with banker money that night….

  • Skynard

    Currently full long 6J, nice shake out!! Things getting interesting tonight:)

  • http://dartht.blogspot.com/ Darth_Gerb

    wooowee, turn my head for a few minutes.
    zig-and-freakin-zag rats. [aud/jpy]

  • Skynard

    Ah ha!

  • Darkthirty

    4 pts bid/ask es

  • Skynard

    Ignition again:) Still have that daily 375 NLBL.

  • http://dartht.blogspot.com/ Darth_Gerb

    come on 92.33 – you can do it.
    (or has that expired?)

  • Skynard

    Yep, still there and still valid through tomorrow:)

  • Skynard

    Nice leg down /NKD:)

  • http://dartht.blogspot.com/ Darth_Gerb
  • Skynard

    Mwahahahaha, /ES hourly NLSL @ 79.5

  • Joe_Jones

    Indeed. whipsaw galore. 

  • Joe_Jones

    That’s the Christmas card I’d love to get 

  • Skynard

    Went long /DX at the 25 daily

  • http://evilspeculator.com molecool

    Hehe – I should make posters :-)

  • newbfxtrader

    t-shirts!

  • http://dartht.blogspot.com/ Darth_Gerb

    large coffee mugs

  • http://dartht.blogspot.com/ Darth_Gerb

    I have no bearish indicators.  
    The futures are only down a point..sometimes the mind see things.
    http://s8.postimage.org/5c44p4wut/temp1.png

  • http://evilspeculator.com molecool

    ¤ø„¸¸„ø¤º°¨¤ø„¸¸„ø¤º°¨ 
    ¨°º¤  S H A K E   N ¤º°¨ 
    ¸„ø¤º° B A K E !“°º¤ø„¸
    ¸„ø¤º°¨¤ø„¸¸„ø¤º°º¤ø„¸

  • Skynard

    So, does that mean you are going long?

  • http://dartht.blogspot.com/ Darth_Gerb

    no.
    I see divergence between the Aud/JPY & /ES
    I see no advantage at this time.

  • Skynard

    Yes, would agree with that. Already positioned short for now, another volitle trade perhaps:)

  • Darkthirty

    Idiot system says stochs rsi maxed up, macd not so much, data could be crap too





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