Fed Buys $587 Billion In Bonds In Past Week, 2.7% Of GDP, Just As Foreign Central Banks Start To Liquidate

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Fed Buys $587 Billion In Bonds In Past Week, 2.7% Of GDP, Just As Foreign Central Banks Start To Liquidate

Having moved from "Not QE" (or QE4 as it was correctly called), to the $750BN QE5 which came and went with the blink of an eye, to the Fed's open-ended and unlimited QEnfinity in the span of one week, the full "shock and awe" of the Fed's money printer is now on full display, and in just the past week, from March 19 to Marc

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h 25, the Fed has purchased $587BN in securities ($375BN in TSYs, $212BN in MBS), or roughly 2.7% of the $21.4TN in US GDP.

This means that as of Wednesday close, when accounting for last week's repo operations, the Fed's balance sheet has increased by roughly $650BN, bringing it to just over $5.3 trillion, an increase of $1.2 trillion in the past two week, or roughly 5.6% of US GDP.

Some more scary statistics: if the Fed continues QE at the current pace of $625 billion per week, the Fed's balance sheet will hit $10 trillion by June, or just below 50% of US GDP. Even assuming the Fed eases back of the gas pedal, its balance sheet is almost certain to hit $7 trillion by June.

Which is hardly an accident: one look at the Treasury securities held in custody at the Fed shows that the past two weeks have seen a whopping $50BN in foreign central bank sales, a 1.7% drop which was the highest in six years since Russia pulled over $100BN in TSYs from the Fed at the start of the Crimean war in 2014.

As Bloomberg observes, the selling may have contributed to record volatility in the Treasury market and prompted the Fed’s intervention. More importantly, it also means that the biggest buyer of US Treasurys in the past decade, foreign official institutions (i.e., central banks and reserve managers) are now sellers, so now the U.S. government needs private investors to soak up the ever increasing debt issuance.

And since those are busy avoiding a deadly virus, it means that only the Fed now can fund the exploding US budget deficit... which is precisely what it is doing.

Ironically, it was back on Jan 28, just as the world was learning about the coronavirus pandemic that we showed the long-term trajectory of the Fed's balance sheet as calculated by the CBO...

... when we said when we said that "MMT will be launched after the next financial crisis, and which will see the Fed directly monetize US debt issuance from the Treasury until the dollar finally loses its reserve currency status."

We were right about the first part. Now we just have to wait for the second.

Tyler Durden

Wed, 03/25/2020 - 22:10

Bank Of Japan Buys Record 101 Billion Yen In ETFs To Stabilize Markets

zerohedge News bank japan buys record billion etfs stabilize markets All https://www.zerohedge.com   Discuss    Share
Bank Of Japan Buys Record 101 Billion Yen In ETFs To Stabilize Markets

While over the past 24 hours, the US Federal Reserve appears to have gotten cold feet about intervening in the market and/or cutting rates, its Japanese peer had no such misgivings.

AS a reminder, Friday saw Fed Chairman Powell step in with a rare public statement, in which he stated that "the coronavirus poses evolving risks to economic activity. The Federal Reserve is close

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ly monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy." And yet despite this Greenspan-playbook preview which helped send US stocks soaring in the last minutes of Friday trading, Powell didn’t actually do anything over the weekend, as the whispers had had it.

His BOJ colleague, Haruhiko Kuroda, however, was far more aggressive, and on Monday morning, the BOJ also csme out and made clear that it too has noticed that things are not going well (and recall Japan was already in recession, which today’s Q4 capex data at -5.0% only underlines), and said that the BoJ would "closely monitor future developments."

More importantly, however, besides mere jawboning, the BOJ did in fact step in to stabilize markets, and with the Nikkei openly sharply lower, the BOJ unleashed a record stock market intervention and bought a record amount of Japanese stock ETFs on Monday, central bank data showed. Indeed, according to Reuters, on top of its small daily purchase of ETFs targeted to "encourage companies’ capital spendings", the BOJ bought 100.2 billion yen ($926 million) of ETFs, much larger than the 70-74 billion yen it habitually buys.

The BOJ's panicked attempt to stabilize the market takes place three monts after we reported that the Japanese central bank would start lending out ETFs to prevent a market freeze as a result of its relentless purchases, and as the market literally runs out of ETFs to purchase and keep systemic liquidity ample. The problem: the BOJ already owns nearly 80% of the country’s stock of ETFs, the result of a program begun in 2010 and ramped up in 2013.

And with every incremental purchase, not only does the stock of existing ETFs shrink, but incremental BOJ intervention threatens to tip over the market into an illiquid crunch. Of course, the BOJ can "fix" this issue by simply expanding its universe of eligible securities to also include single stocks, which is inevitable now that the coronavirus pandemic threatens to transform Japan's garden-variety recession into a depression. Until then, however, for all those asking why futures aren't far lower, thank Kuroda, whose central bank once again demonstrate that the only thing that matters is stocks.

Tyler Durden

Mon, 03/02/2020 - 09:06

ECB Buys LVMH Bonds To Finance Tiffany's Acqusition, Making France's Richest Man Even Richer

zerohedge News buys lvmh bonds finance tiffanys acqusition making frances richest even richer All https://www.zerohedge.com   Discuss    Share
ECB Buys LVMH Bonds To Finance Tiffany's Acqusition, Making France's Richest Man Even Richer

When France's richest man, LVMH boss Bernard Arnault, shocked the market last November with his $16 billion purchase of jewelry icon Tiffany, he knew he would have to issue about $10 billion in bonds to fund the deal. He also knew it wouldn't be a problem, for one reason: the ECB would be there to make sure the deal got done. But not even Arnault, who expected the yield f

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rom the bond issuance to be "between 0% and 1%" anticipated that the deal would get done in a way that the bond market would end up paying him.

Yes, thanks to the lasting legacy of one Mario Draghi, the richest man in France is now even richer because he had to issue debt.

What happened? As the financial world was closely following every fabricated data point out of Beijing in China's fight with the coronavirus epidemic, LVMH quietly raised €7.5 billion ($8.3 billion) and GBP1.55 billion ($2 billion), over a range of maturities from two to 11 years, to help finance its $16 billion purchase of Tiffany.

Here's the kicker: as Reuters reported last week, not only was the €9.3BN bond deal more than 50% upsized from the initial price talk of €6BN just earlier that day, but two of the five euro tranches were placed at negative yields, meaning investors would pay the A-rated LVMH to borrow money. Even the longest maturity, an 11-year euro tranche, had a yield of just 0.43%.

And it didn't even have to be pitched as a "green" bond.

Here, as Bloomberg's Marcus Ashworth writes, the French billionaire can thank Mario Draghi and the ECB for two reasons.

First, it was the restart of the ECB's €189 billion CSPP (Corporate Sector Purchasing Program) corporate bond buying program that helped drive credit spreads ever lower, and in many cases to negative levels meaning investors pay not sovereigns but corporations to take their money. And while the central bank may have wanted to lessen the funding costs of European companies to make it easier for them to invest, "it may not have been meaning to help a French luxury behemoth snap up an American jewelry icon", Ashworth writes.

There is second way the ECB made the richest Frenchman richer: for the collateral starved central bank, a major issuance of this size means that at least portion of the original offering will have been bought by the ECB (or will be at some point in the near future). As the Bloomberg commentator notes, "often the bank takes up to 20% of eligible issues, and there has a been a real paucity of high-quality credit since the Quantitative Easing program kicked back into life."

Indeed, the ECB's ravenous purchases of virtually any corporate debt led to the infamous holdings of Steinhoff debt, with Mario Draghi emerging as one of the biggest holders of debt just as the company imploded, its ratings cut instantly from investment grade to deep junk, and had the ECB not sold its holdings, the central bank would have ended up as a stakeholder in the post-reorg equity, in effect owning stock in a private corporation even though the ECB is not legally permitted to buy equities (at least not that we know of).

The ECB wasn't just making billionaires richer as part of its "trickle down" mandate in a time when credit spreads are at the tightest ever levels: as Bloomberg's Ashworth also notes, there was another jumbo corporate sale in Europe at the start of February by U.S. Media giant Comcast Corp., which issued notes worth 3 billion euros and 1.4 billion pounds.

This type of sale is known as a “reverse Yankee,” where an American company issues debt, but not in dollars. Maybe we could refer to LVMH’s use of dirt cheap funding in its home currency to buy an American company as a “reverse, reverse Yankee.” The world of finance is ever flexible.

Armed with this information readers can now freely accost anyone who claims that central banks have failed in their mission of making the general population richer. Well, actually they have, but to compensate at least they make the occasional billionaire hundreds of millions of dollars richer. As for everyone else, well they understandably pissed that none of these free handouts ever make it to them and so they get to vote for populists, even as the highly educated establishment is puzzled why for the first time ever, a majority of the world's population is dissatisfied with "democracy" and thinks the world has become a banana republic.

One wonders how Europeans would react if the Fed so overtly helped a US acquiror take over a European company; Americans, of course, have many other things to distract them than to pay attention to the biggest wealth transfer from one giant group of people to another, vastly smaller one.

We give the parting words to Jonathan Tepper, who best summarized the patently absurd pre-collapse state global civilization finds itself in:

Tyler Durden

Tue, 02/18/2020 - 18:05

China Pledges $50 Billion In Ag Buys... There Is Just One Problem

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China Pledges $50 Billion In Ag Buys... There Is Just One Problem

US Trade Representative Lighthizer has released some details of the phase one US-China trade deal... there's just one big elephant in the room that is raising a few eyebrows.

Apparently confirming President Trump's comments, Lighthizer told reporters that China has agreed to purchase USD 40 billion in Agricultural goods in the first year (with "best efforts" to increase th

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at to USD 50 billion the year after), that there will be additional negotiations and the deal is expected to be signed in early January (at a ministerial level - not Xi and Trump). Lighthizer confirmed that China's expectation is that there will be further phases and further reductions in tariffs, and he confirmed that the agreement will increase US Trade to China by USD 200bln over 2 years. (There will reportedly be a more detailed factsheet released this afternoon).

That all sounds awesome, right?

Well, to reach $40 billion next year, China would have to quadruple its US Agricultural imports!!

In 2018, China bought less than $10 billion in Ags from the US (and to reach $50 billion would mean to double the previous record high Ag exports)...

Notably, as @AgriTrends notes, to reach $50 billion... China could buy the entire U.S. soybean crop for $36 billion, then what else?


And as China purchases from US have plunged, they have shifted demand to Latin America...

So Brazil will be very upset if this deal is actually fulfilled, and it will likely mean China breaking contracts with its new suppliers.

All of which explains two things:

Why Agricultural commodities are not screaming higher...

And neither are stocks, yuan, or copper, as investors appear to be discounting the rising probability of the Phase One Deal being busted within a few months as the "promised" purchases do not occur... and if that is close to the elections, it could well mean an ugly market reaction.

Tyler Durden

Fri, 12/13/2019 - 17:45


Business Finance


Elizabeth Warren Buys Facebook Ads Claiming Mark Zuckerberg Backs Trump

zerohedge News elizabeth warren buys facebook claiming mark zuckerberg backs trump All https://www.zerohedge.com   Discuss    Share
Elizabeth Warren Buys Facebook Ads Claiming Mark Zuckerberg Backs Trump

Elizabeth Warren's campaign is buying ads on Facebook which falsely claim that CEO Mark Zuckerberg has endorsed President Trump - before quickly admitting it's not true.

The message? Facebook needs to fact-check ads by politicians. 

The Democratic presidential candidate’s campaign sponsored the posts that were blasted in

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to the feeds of U.S. users of the social network, pushing back against Facebook’s policy to exempt politicians’ ads from its third-party fact-checking program.

The ad begins with a lie: Facebook’s chief executive officer “just endorsed” Trump for re-election. It quickly backtracks to the truth. -Bloomberg

"You’re probably shocked. And you might be thinking, ‘how could this possibly be true?" the ad says. "Well, it’s not."

"What Zuckerberg ‘has’ done is given Donald Trump free rein to lie on his platform -- and then to pay Facebook gobs of money to push out their lies to American voters," reads Warren's ad. 

Hilariously, Bloomberg's example of an 'untrue' Trump ad revolves around video evidence of former Vice President Joe Biden threatening to withhold $1 billion in US loan guarantees from Ukraine if they didn't fire a prosecutor investigating a gas company paying his son $600,000 per year. 

The Biden campaign has asked both Twitter and Facebook to remove the Trump ads, however both platforms have refused according to The Verge. "The ad you cited is not currently in violation of our policies," said one Twitter spokesman. 

Facebook’s decision to allow Trump’s ad contrasts with CNN, which rejected a request by the president’s campaign to run what the network called two “demonstrably false” claims.

“If Senator Warren wants to say things she knows to be untrue, we believe Facebook should not be in the position of censoring that speech,” Andy Stone, a spokesman for Facebook, said in a statement to CNN on the ads. -Bloomberg

Warren, meanwhile, is also guilty of false advertising - such as an Instagram video which suggests she might be fun to share a beer with. 

Tyler Durden

Sat, 10/12/2019 - 10:20


Technology Internet


Defiant Facebook Buys Startup Focused On 'Controlling Computers With Your Mind'

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Defiant Facebook Buys Startup Focused On 'Controlling Computers With Your Mind'

Last week, Mark Zuckerberg visited Capitol Hill to try and 'win friends' in Congress. It was his first big trip back to Washington since the contentious House and Senate hearings last year, where the Facebook chief was accused of sometimes treating lawmakers with disdain (who can forget 'senator, we run adds'?).

The timing of his trip is starting t

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o make more sense. Thanks to a flurry of federal and state investigations, for the first time in its existence, Facebook is facing the very real risk of being broken up. Several lawmakers have asked whether breaking Facebook into Instagram, Whatsapp and Facebook wouldn't be better for consumers. Facebook agrees that something should be done to regulate social media and other Internet companies, but it doesn't think the bipartisan anti-trust movement that formed in the aftermath of the Cambridge Analytica scandal is the right path.

But given all of the scrutiny surrounding the company and its acquisition, Facebook has reportedly agreed to buy CTRL-Labs, a tech startup working on software to let people control a digital avatar using only their thoughts, for somewhere between $500 million and $1 billion, Bloomberg reports.

The closely held four-year-old startup has dozens of employees and has raised tens of millions in venture capital. Its only product right now is a bracelet that measures neuron activity to try and determine a movement that a person might be thinking about, even if they aren't physically moving. The 'neuron activity' is then displayed on a screen.

Unleashing the power of the mind has always been of great interest to Zuckerberg, as has virtual reality and augmented reality. The company is developing a hands-free pair of AR glasses, and Zuck once said that Facebook would introduce a "brain-computer interface" allowing people to manipulate text with their thoughts.

Still, making a big, splashy acquisition right now is a bit like tempting fate.

Zuckerberg needs to learn how to read the room. Unless he believes these investigations are simply fleeting annoyances that will soon pass.

Tyler Durden

Tue, 09/24/2019 - 05:35


Technology Internet


Orange is at it again, buys SecureLink for an eye-watering €515m including debts

logicfish Security orange again buys securelink eye-watering 515m including debts All http://go.theregister.com   Discuss    Share
French telco's cyber arm consumes second infosec specialist of 2019

Orange has snaffled Belgium-based security services outfit SecureLink for a whopping enterprise buy price of €515m.…


Bucharest's Bayrob boys blasted based on bogus buys, Bitcoin banditry, bound to be behind bars

logicfish Security bucharests bayrob boys blasted based bogus buys bitcoin banditry bound behind bars All http://go.theregister.com   Discuss    Share
Romanian duo catch 21 felony convictions for selling details of hacked machines on darknet

Two Romanian nationals face the prospect of years in a US prison after being convicted for their roles in a malware-based financial fraud ring.…

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