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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: russwinter who wrote (99978)	11/27/2008 12:17:08 PM
From: RJA_	1 Recommendation Respond to of 110194

blogs.cfr.org…/ China shifted from buying Agencies to buying Treasuries in July. Others did too, but no one has quite the market impact of China. China doesn't disclose what it is doing with its reserves, but the recent shift in Chinese demand isn't really in doubt. The market knows it. The TIC data for August showed it. And the latest Fed data strongly suggest large ongoing migration from Agencies to Treasuries. China now accounts for such a large share of the world's reserves that it is hard to see how the FRBNY's custodial data doesn't reflect, at least in part, a shift in Chinese demand. A key themes of this blog has been how the internal imbalances of China's economy are a reflection of its undervalued exchange rate – and that China's surplus has implications for the world. It has to be balanced by large deficits elsewhere. Another key theme has been that the Fed has been pushed to absorb risks that other central bank reserve managers now shun. Nothing illustrates this more clearly than the Agencies. Foreign central banks are scaling back their Agency holdings. The Fed is gearing up to buy. Big Time. One last note: I am taking a few days off for Thanksgiving – I'll be posting again next week.

To: russwinter who wrote (99978)	11/27/2008 5:52:32 PM
From: bart13	1 Recommendation Read Replies (1) \| Respond to of 110194

Yet another milestone along the path to monetary and fiscal hell, monetization wise, etc. One of the more "interesting" things that no one I know of has covered in any depth is - where did the $1.3+ trillion come from to grow the Fed's balance sheet recently? We know about $600+ billion came from the Treasury via the SFP and that money was mostly from the "flight to quality"... but how much of the rest is actually "stealth monetization"? 100s of billions into the PDCF, TAF, TSLF etc... they're neither a temp repo (limited to 60 days if memory serves) nor a permanent repo which would show up in SOMA as real monetization. It sure is yet another item that makes me want to go hmmmm, and then some...