Is The Market About To "Undo" The Fed's Purchases? [Credit] - MarketTicker Forums


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User Info	Is The Market About To "Undo" The Fed's Purchases? in forum [Credit]
Ricka01 Posts: 1215 Incept: 2009-03-05	Analysis from The Big Picture: http://www.ritholtz.com/blog/2009/09/is-.... The final two paragraphs: "Apparently bond managers are now concluding the Federal Reserve is not going to sell their holdings acquired through their QE operations. So, they are demanding the calculation of, and in the case of Vanguard, the adopting of “float-adjusted” indices as their benchmarks. If this is the beginning of a trend, it has the potential to be a big deal. As the Federal Reserve buys, weightings in the float-adjusted indices fall (see the first table below). Managers seeking to keep their weightings constant will then sell the same securities the Federal Reserve purchases. Effectively this “undoes” the Federal Reserve purchases and defeats the purpose of the program. In the end, it merely changes the ownership of securities and does little to push yields lower." This is exactly what Karl D. said would happen - if the Fed is going to buy, eveyone will sell to them! 2009-09-25 11:06:25 Permalink
Pcscipioi Posts: 735 Incept: 2008-01-06 LVNV	Also see: http://accruedint.blogspot.com/ 2009-09-25 11:16:04 Permalink
Genesis Posts: 130804 Incept: 2007-06-26	Gee, funny how that works.... ---------- I don't care* if it makes sense -- only if it makes money. -- Me* Bank (n): See scam, fraud and theft. *Eat a bankster -- they're low-carb.* *What part of "shall not be infringed" was unclear?* 2009-09-25 11:35:31 Permalink
Cjworkman Posts: 7948 Incept: 2007-08-22 Banned	Apparently you need more than a PHD in economics to know what happens when you create an inflated bid... ---------- 2009-09-25 12:52:15 Permalink
Throxxofvron Posts: 10339 Incept: 2009-02-17 Hyper-Speculative Psycho-Facsistic Parabolic Blow-Off	Oh, it gets better than that. Ben is really excellent at Overpaying & getting creamed with Coupon... Voila!: http://www.tickerforum.org/cgi-ticker/ak.... ---------- DIONYSUS: " Thou hast no knowledge of the life thou art leading; thy very existence is now a mystery to thee. " -from 'The Bacchantes' By Euripides “During times of universal deceit, telling the truth becomes a revolutionary act.” -George Orwell 2009-12-23 10:55:56 Permalink
Bozonian Posts: 19892 Incept: 2007-09-01 Saratoga Springs, New York	Hmmmm. Who is Coupon and how much does she charge? ---------- Forget about blaming, fighting with, or crediting other people. The only real challenge in life, is with yourself. -- Me Everything I write is my opinion and not to be considered proven fact. Nothing I write should be considered financial advice. 2009-12-23 11:06:07 Permalink
Vapor Posts: 1266 Incept: 2008-04-10 virginia	Quote: Dow Jones – Vanguard Shifts Bond Index Due To Fed Buys The Vanguard Group plans to switch 12 of its bond index funds to benchmarks designed to exclude the hefty chunk of bonds the government has purchased through its buyback program. Other fund providers may follow suit. Eight existing and four proposed Vanguard bond index mutual funds and exchange-traded funds will switch to tracking the Barclays Capital U.S. Aggregate Float Adjusted Index and its sub-indexes by year’s end. Unlike the indexes now in use, the new indexes adjust for so-called float, or the number of shares currently available for trading, a practice more commonly associated with stock benchmarks that seek to disregard shares owned by governments, company insiders or corporations, which have no intention of selling. Vanguard says the new bond benchmarks more closely represent actual liquidity in the market, and thus should help insulate the funds from price distortions created by the Fed’s buybacks. The money manager says it expects no significant change in the risk attributes, including duration, of the bond index funds. Interesting. I wonder how concerned these institutional bond traders are about price distortions of bonds that are NOT held by the Fed. Doesnt the feds actions distort the entire bond market, even if the Fed buys only treasuries? 2009-12-23 11:21:14 Permalink
Iflyjetzzz Posts: 8876 Incept: 2007-07-29 Tucson, AZ	Quote: Hmmmm. Who is Coupon and how much does she charge? Coupon's in Vegas at the Palomino Club. Are you looking for an hourly or nightly rate? ---------- When the facts change, I change my mind, sir. What do you do? 2010-01-26 17:22:29 Permalink
Movedtonz Posts: 953 Incept: 2008-03-09 Hawkes Bay	Think of the converse situation... What happens if the Fed starts selling and all these funds are tied to these floating indices? Well, IMO it would appear that all the funds that are tied to the float would have to buy what the Fed sells. Of course, will the Fed sell? Really wish that the MF mgrs had done this index change a year ago! ---------- Americans need to stop claiming stupidity to get out of responsibility. -Tsk 2010-01-26 17:39:56 Permalink
Bozonian Posts: 19892 Incept: 2007-09-01 Saratoga Springs, New York	Largest bond fund, Pimco, cuts US government holdings http://gata.org/node/9607 ---------- Forget about blaming, fighting with, or crediting other people. The only real challenge in life, is with yourself. -- Me Everything I write is my opinion and not to be considered proven fact. Nothing I write should be considered financial advice. 2011-02-14 21:23:59 Permalink
Laswyguy Posts: 8326 Incept: 2007-07-25 Orange County, CA	uuh.. and if they sell.. where do they put the money?? its gotta go somwhere..dow 36,000..LOL ---------- positive alpha - bitches! 2011-02-17 22:37:01 Permalink