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To: 4rthofjuly007 who wrote (19631)	11/6/2001 2:50:12 PM
From: The Freep	Read Replies (1) \| Respond to of 209892

<<Where do these liquidity injections go?>> As far as I can tell, they go straight to buying the stocks that make up the SOXX index. But I could be wrong. the freep, who will leave it for someone smarter to give a better explanation of the true path of injected money.

To: 4rthofjuly007 who wrote (19631)	11/6/2001 3:17:06 PM
From: KyrosL	Read Replies (2) \| Respond to of 209892

>>Where do these liquidity injections go? Fed free market operations simply buy and sell T-bills in the open market. When the Fed buys, the money in circulation increases (and the amount of T-bills in circulation decreases.) The money goes to the original owners of the T-bills from whom the Fed bought. The price of the T-bills goes up because of the extra Fed demand and their interest rate goes down, bringing it in line with where the Fed wants it to be. The original owners probably wanted to sell anyway to use the money for some other purpose, and the Fed's intervention makes their sell decision easier. Most of the money goes to longer term Treasury of corporate bonds, some to other investments such as foreign bonds, stocks or other assets. Repos are temporary injections; the Fed will sell back those securities after a set time interval. Coupon passes are permanent injections. The idea that these injections "go straight to stocks" is wrong. The holders of the T-bills (mostly banks) are conservative types and selling their bills to buy stocks is not usually the kind of move they make. However, as interest rates go down the relative attraction of stocks increases, so a portion of these injections do find their way into the stock market.