November 14th, 2012
by Lee Adler, The Wall Street Examiner
The NY Fed today published its statement of intended MBS purchases for the next month under the MBS Reinvestment Program. It plans to purchase a total of $35 billion in MBS from Primary Dealers. That’s $6 billion more than last month. It will bring the total of cash injected into Primary Dealer accounts for the month to $85 billion.
The MBS purchases are forward contracts normally with a 30 to 60 day settlement.
The Fed will publish the results of its purchases of the past month tomorrow. That will show the schedule of settlements for purchases made in the past month including purchases made under the new QE3 program. The first of the the new combined QE3 and MBS Reinvestment Program settlements, totaling $26.5 billion will come tomorrow. An additional $18.3 billion will settle next week. These purchases add funds to Primary Dealer accounts. They are the conduit for the transmission of monetary policy into the banking system.
Between the new QE3 purchases scheduled at $40 billion per month, the MBS reinvestment program at $35 billion for this month, and the $10 billion more in Treasuries that the Fed will purchase from Primary Dealers than it will sell to them in November under Operation Twist, the Fed will cash out the Primary Dealers to the tune of $85 billion this month. That’s the largest monthly amount of market boosting fuel since QE2 in the first half of 2011.
The November payments to Primary Dealers is at the astounding annual rate of $1 trillion!
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About the Author
Lee Adler is the editor and publisher of The Wall Street Examiner and the Wall Street Examiner Professional Edition, and host of Radio Free Wall Street with panelists Russ Winter of the Winter Economic and Market Watch, and Aaron Krowne of the Mortgage Lender Implode-o-meter. Lee’s analytical work focuses on how changes in liquidity impacts markets, with particular attention to the Fed and its workings with Primary Dealers, the Treasury, and foreign central banks, as well as fund flows through the banking system and money fund and mutual fund complexes.
Lee also produces daily updates on the stock and precious metals market based on cyclical analysis and proprietary indicators derived from the pioneering cycle work of JM Hurst. He reports regularly on the housing market as a critical adjunct to the Fed and Treasury reports. For those who are interested, first time subscribers to the Professional Edition can avail themselves of a 30 day risk free trial. Information is available on the Wall Street Examiner home page. Lee generally does not make Professional Edition reports available to the public. He will make samples available to qualified individuals or institutions on a case by case basis on request. Contact Lee at http://wallstreetexaminer.com/contact-us/