Ok, I know this is 3 days old but I didn't see it posted anywhere. If it's not breaking enough, please move it.

My jaw did drop however when I saw this title.

http://www.bloomberg.com/news/2012-03-12....


Banks Buy Treasuries at Seven Times Pace in 2011
By Susanne Walker - Mar 12, 2012 11:44 AM PT

U.S. banks bought more government and related debt in the first two months of 2012 than they did in all of last year, an endorsement of Federal Reserve Chairman Ben S. Bernanke’s assessment of the economy that’s boosting demand for bonds even with yields near the lowest on record.

Commercial lenders purchased $78.2 billion of Treasuries and securities of agencies in January and February, compared with $62.6 billion in all of 2011, bringing their holdings to $1.78 trillion, Fed data show. Deposits exceeded loans by a record $1.63 trillion last month, up from $1.17 trillion in January 2011, providing scope to buy more bonds.

Attempts to obscure massive printing operation? This looks like they can't export inflation anymore.

"U.S. banks bought more government and related debt in the first two months of 2012 than they did in all of last year, an endorsement of Federal Reserve Chairman Ben S. Bernanke’s assessment of the economy that’s boosting demand for bonds even with yields near the lowest on record."

Wait, wait, wait. Don't the bank HAVE to buy the bonds if they're primary dealers?

Perfectly normal and sustainable in a healthy, vibrant economy....

No, actually don't they have to buy bonds to prevent a failed auction? Doesn't this really mean that the demand for UST's isn't what we've been lead to believe?

Quote:

U.S. banks bought more government and related debt in the first two months of 2012 than they did in all of last year

This is how the ECB has been working things recently.

The ECB loans money to the banks, propping up the banks who buy sovereign debt with the funds.

The FED has been propping up the banks, and the banks are now buying our sovereign debt with the funds.

In both cases, it is because there are not enough other buyers for the sovereign debt.

Swing-

While this makes sense, and I agree with it logically. Why are we not seeing the violent moves in treasuries (yes, I know they are creeping up), that would reflect this?

spank wrote..

Why are we not seeing the violent moves in treasuries (yes, I know they are creeping up), that would reflect this?

actually, I don't really know

Greece bomb or Portugal implosion will likely drive demand through the roof. Who's to say that EU banks or countries are not absorbing the UST's through the primary dealers?

If it's not going on now it could be shortly and the primary dealers will unload and make money off of the spread.

bruce has an excellent post on this.

http://brucekrasting.blogspot.com/2012/0....

Quote:

While this makes sense, and I agree with it logically. Why are we not seeing the violent moves in treasuries (yes, I know they are creeping up), that would reflect this?

Because the banks are using funny money to buy treasuries, if anyone else demands higher yield they just bid lower.

At this rate it won't be long before they're buying 100% of the treasuries.

The only different between this and Wiemar is the delay before inflation hits.

It seems like they're doing all they can to keep the system from imploding before the election. The price to be paid for such shenanigans is going to be historical, nay Biblical, in size.

Quote:

Attempts to obscure massive printing operation?

I'd say it's not (and hasn't been) obscured very well.

Frontrunning the Fed in expectation of QE3.

Banks have funds, they don't want or expect to need those for business or personal loans, they expect interest rates to remain low.

I think it's that simple. They expect the deflationary depression to continue for the foreseeable future.

Quote:

Wait, wait, wait. Don't the bank HAVE to buy the bonds if they're primary dealers?

Yes, they do. The only way to refuse is to drop primary dealer status.

Quote:

Banks have funds

No they don't. These banks get to borrow from the Fed at 0% and then "buy" treasuries at 2%. Carry trade caused by the Fed's ZIRP.

Sounds like they have funds to me but you don't like the source.

Obs,

If round 3 is publicly announced I would expect the national average for gas to be 5 bucks in a heartbeat. Not disagreeing and lord only knows what sort of buying may be going on behind the curtain, but if that comes to pass things will get interesting quickly. IMHO

Quote:

The price to be paid for such shenanigans is going to be historical, nay Biblical, in size.

I agree with this completely. I feel like I am watching this:

If I borrow at 0% I don't have funds ... I have a liability: supposedly. Unless of course there's an under-the-table gentleman's agreement that I don't have to pay. In which case, I have funds.

Also, as others have noted, the PD's are obligated to buy T's when auction "demand" doesn't take the float.

If I can borrow at zero and loan at 5 I have a money tree.

Doesn't that period include the stress tests? So the banks would need treasury paper to show for their tier I capital, right? Easy enough to sell some after the stress tests. Maybe JPM was getting itchy to sell into the opportunity in Europe. Maybe that's why they wanted to jump the gun on the announcement of the stress test results.

Quote:

If I can borrow at zero and loan at 5 I have a money tree.

Exactly. So, the banks don't "have funds." They have fraud.

Maybe it's just me. But the phrasing "the banks have funds" implies that they have honestly earned money to honestly invest. I want to state clearly that they don't. They have fraud.

Swing + 1 More of One Hand Washing the Other. Now the spread on the profits can be shared with the super PACs to ensure that independent candidates for public office are more effectively suppressed.

I never said it was right but in the new America, they have funds.