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US Treasury announces first buyback scheme in decades to boost liquidity


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2024 Jun 4, 6:00am   856 views  29 comments

by Al_Sharpton_for_President   ➕follow (5)   💰tip   ignore  

Investors surprised by timing of announcement as Washington embroiled in debt ceiling fight

The Treasury department on Wednesday said it would repurchase US government debt next year for the first time in decades, in an effort to boost liquidity in the $23tn government bond market.  

The programme would allow the Treasury to buy back older bonds, which are typically harder to trade, from primary dealers — banks that act as market makers for the Federal Reserve — and help improve functioning in some corners of the market.

The buybacks are expected to help with cash management, allowing the department to issue more consistent levels of shorter-dated debt.

This would be the Treasury’s first buyback programme since the early 2000s, and comes after liquidity — the ability to easily buy and sell an asset at prevailing market prices — deteriorated late last year to its worst levels since March 2020.

“We think this will support Treasury market functioning because it provides market makers [with] certainty that there will be an end buyer that will come into the market that is willing to buy dislocated securities along the curve for a price,” said Mark Cabana, head of US interest rate strategy at Bank of America.

The rapid growth in the Treasury market, which has quadrupled since 2008, and changes in the make-up of participants in the market have made functioning worse in recent years. The increase in interest rates also hurt liquidity, as greater volatility made it harder and more expensive to buy and sell bonds.

Big banks have retreated from traditional market-making activity in recent years as capital requirements in the wake of the financial crisis have made it more expensive for them to hold government debt on their balance sheets. High-speed traders and hedge funds have stepped in, but the liquidity they provided has not been as consistent and the unwind of leveraged positions has contributed to liquidity problems.

The buybacks will support primary dealers, but are not expected to be big enough to change the dynamics of the post-2008 market. The supplemental details on buybacks also noted the programme would not be used to mitigate instances of acute market stress.

The Treasury department has been considering a buyback scheme since last year, when it first sought feedback on the topic from primary dealers. There were few details in the announcement, except that the programme was expected to start next year, and that it would initially be sized “conservatively”. 

The programme is not expected to interfere with the Fed’s efforts to shrink its balance sheet as the Treasury’s bond repurchases would be comparatively small and ultimately offset by issuance over time.

“The idea behind buybacks is to clear this less liquid inventory off dealer balance sheet and replace it with more liquid inventory,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott. “It is a question of market functioning rather than stealth quantitative easing.” 

The announcement was part of a broader release from the Treasury department detailing its borrowing plans for this quarter. It said it would maintain its auction size at $96bn in the second quarter, but added that it could boost borrowing as soon as August, to better manage the US government’s cash flow.

Though the bond repurchases had been under discussion since last year, some analysts and investors were surprised at the timing of the announcement as the White House and Republicans clash over the debt ceiling.

“I would have thought they would have waited until after the debt limit was increased,” said Matthew Scott, head of  global rates trading at AllianceBernstein.

https://www.ft.com/content/808f8b31-61ac-4f8b-aec1-744ea9b4b6b3



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1   fdhfoiehfeoi   2024 Jun 4, 7:58am  

This is misleading. Anytime there isn't enough buyers for government bonds, the Fed buys them by printing the money. Stop trying to add integrity to banking!
2   HeadSet   2024 Jun 4, 8:06am  

Nuttboxer is correct. The "buyback" of bonds will be done with printed money.
3   PeopleUnited   2024 Jun 4, 8:47am  

It’s true, but it’s not printed. It is just created out of thin air in a computer.

Just one more set of cards in the ever growing house of cards. How tragic will it be when the cards start to drop. It could be the rapture that sets the collapse in motion.
4   Laecrivain   2024 Jun 4, 9:02am  

But if they are paying off debt with new money that they create out of nothing how is that debt being transferred to the people who didn't go to college? And thus the student loan relief haters disproved their own talking point by demonstrating the reality of MMT.
5   DhammaStep   2024 Jun 4, 10:39am  

Laecrivain says

But if they are paying off debt with new money that they create out of nothing how is that debt being transferred to the people who didn't go to college? And thus the student loan relief haters disproved their own talking point by demonstrating the reality of MMT.

If you are holding funny money, you are subject to inflation from any number of silly fiat whims.
6   DemocratsAreTotallyFucked   2024 Jun 4, 10:41am  

NuttBoxer says


This is misleading. Anytime there isn't enough buyers for government bonds, the Fed buys them by printing the money. Stop trying to add integrity to banking!


No. The Treasury doesn't print money. It can, but doesn't. The Fed does.

They are simply creating short term bonds to replace 10 year bonds that haven't even matured yet, even though it is a bad deal for the tax payer.

This guy explains it well: https://youtu.be/5uWMNTop72I?si=EQzGiDjl8KToDWTT
7   Al_Sharpton_for_President   2024 Jun 4, 3:47pm  

They’re taking underwater low yielding long-term UST’s rotting in the guts of market makers (I would bet paying over market prices for them) so that the market makers can buy more UST’s. Yes, they are borrowing at a higher rate to retire bonds that pay a lower rate. It’s like you paying off a lower interest rate credit card balance with a higher interest rate credit card.
8   FortwayeAsFuckJoeBiden   2024 Jun 4, 5:12pm  

PeopleUnited says

It’s true, but it’s not printed. It is just created out of thin air in a computer.

Just one more set of cards in the ever growing house of cards. How tragic will it be when the cards start to drop. It could be the rapture that sets the collapse in motion.


media will just blame “welfare and liberals”, financial slave holders never get shit.
9   DemocratsAreTotallyFucked   2024 Jun 5, 2:45am  

Al_Sharpton_for_President says

They’re taking underwater low yielding long-term UST’s rotting in the guts of market makers (I would bet paying over market prices for them) so that the market makers can buy more UST’s. Yes, they are borrowing at a higher rate to retire bonds that pay a lower rate. It’s like you paying off a lower interest rate credit card balance with a higher interest rate credit card.


Exactly.
10   goofus   2024 Jun 5, 3:31am  

My guess on timing the dollar’s downfall is this:

One can’t be too cynical with this admin. The Biden minders/oligarchs want a war with Russia and perhaps China (to remove Xi), but they need the US to fund it. They won’t let the dollar float on the open currency market, losing global reserve status, until afterward. One of the reasons our currency remains “strong,” despite weakening demand from China and the petrodollar trade, is global fear of US retaliation and instability. With that cudgel gone (because it has been realized through war), the dollar falls to its actual fundamentals.

Good luck to us all in the next decade. I fear what has happened to the poor Ukrainian men, with press ganging and indifferent leadership, will come to the US and NATO countries in the form of a pointless war and draft. Then afterward, the currency loses reserve status and we’re reliant on a hollowed service economy, poor demographics, and impossible debt to prop the dollar. Argentina might be the best outcome, honestly.
11   Al_Sharpton_for_President   2024 Jun 5, 3:58am  

Our next chart shows the level of unrealized losses on held-to-maturity and available-for-sale securities portfolios. Total unrealized losses of $516.5 billion were $38.9 billion higher than the previous quarter. Higher unrealized losses on residential mortgage-backed securities drove the increase, as mortgage rates increased in the first quarter, putting downward pressure on the prices of such investments.

https://www.fdic.gov/news/speeches/fdic-quarterly-banking-profile-first-quarter-2024


12   Laecrivain   2024 Jun 5, 5:01am  

Such unrealized losses are fake because all they need to do is hold them to maturity and then they lose zero. The unrealized losses is some writer talking about what a new secondary market buyer would want to pay for existing securities. Bonds pay PAR (face value) value at the end, no matter what lower amount they are worth on the secondary market. Anyone who paid such lower amounts from the loss-taker would then profit at maturity because they would get full PAR value. The only way to have realized losses on federal or state bonds (since they can't file bankruptcy) is to sell them for less than PAR value, which would mean that it was deliberate loss making. Investment firms may realize those losses, but that is because they have a liquidity need and had to sell early to obtain cash, and that is a function of their own management decision making and not an indication of overall economic market situation.
13   Al_Sharpton_for_President   2024 Jun 5, 5:55am  

Laecrivain says

Such unrealized losses are fake

The US Treasury is bailing out banks by buying back underwater low interest rate US Treasuries through the issuance of higher interest rate US Treasuries. This is not being done to benefit the US government or US taxpayers, but to benefit the banks and other market makers. The unrealized lossess are not only due to underwater US Treasuries, but underwater Mortgage Backed Securities. As the underlying residential mortgages default, the losses on the MBS are unrecoverable, even if the aggregate non-defaulted mortgages in the MBS are held to maturity. Also underwater are Commercial Real Estate loans. As the CRE underlying asset has lost tremendous value, these loans are not secured, and losses are also unrecoverable when the loan holder defaults, or the bank sells the CRE at a loss in order to recover some of the loaned money. Likewise, Commercial Mortgage Backed Securites are underwater, and the losses caused by plummetting CRE values and resulting defaults are not recoverable.
14   RayAmerica   2024 Jun 5, 8:47am  

On top of all this is the massive global derivatives market, estimated to be anywhere from $600 TRILLION to $ One QUADRILLION!

Are you beginning to understand why they called it the "Great Reset?" They know the entire global financial system as we know it is on life support and the prognosis is terminal.
15   DemocratsAreTotallyFucked   2024 Jun 5, 10:06am  

goofus says


My guess on timing the dollar’s downfall is this:


Not going to fall any time soon. And, if USTs ceases being the world reserve asset, demand for USD will increase, not decrease. And it's value will drop, too. Which will make it more attractive to stay as world's reserve currency for a while longer.

Bad news for countries (like China) that depend upon being export driven and a lot to the US. Structuraly lower dollar will increase reshoring (American firms coming home) and localshoring (what Japan & Korea has done for 15 years now) to US.


16   fdhfoiehfeoi   2024 Jun 5, 10:38am  

RayAmerica says

On top of all this is the massive global derivatives market, estimated to be anywhere from $600 TRILLION to $ One QUADRILLION!

Are you beginning to understand why they called it the "Great Reset?" They know the entire global financial system as we know it is on life support and the prognosis is terminal.


They also know we won't accept CBDC's, so they have to force them on us. Maybe through the new WHO pandemic laws they illegally passed..?
17   DemocratsAreTotallyFucked   2024 Jun 5, 10:53am  

NuttBoxer says

They also know we won't accept CBDC's, so they have to force them on us. Maybe through the new WHO pandemic laws they illegally passed..?


Don't need to. Just mandate that employers pay wages onto employee CBDC wallets.
18   Eric Holder   2024 Jun 5, 1:21pm  

goofus says


The Biden minders/oligarchs want a war with Russia and perhaps China


Yeah, right. Does any of below look like preparation for a war or cucking out to AVOID any possibility of any contact at any cost?

....why had the USA, knowing as early as 2021 that Russia was making preparations for an invasion, not taken any preventive actions? After all, they had been able to do so. For example, if a pair of American ships came on a friendly mission to the seaport of Odesa a few days before the invasion, the Russian Federation probably would not have dared [to invade]," Mykhailo Honchar believes.

Until 2022, NATO regularly deployed its forces across the Black Sea. But, in early 2022, NATO’s presence there was de facto nullified. NATO ships were no longer deployed to the Black Sea. This suggests, the expert goes on to note, that the United States, at that time, had its own perception about Russia’s potential invasion of Ukraine.

"Hypothetically, proceeding from the assumption that the USA needs a potent ally to confront China, and Russia could well become such an ally (the Russian Federation shares an extended border with China, exceeding 4,000 kilometers in length, making China an existential threat for the Russian Federation), the U.S. was, let’s say so, not completely opposed to an invasion, but on the condition that it is carried out in some hybrid way, Mr. Honchar notes further. The Russian side, perhaps, had convinced the American side that the invasion would not involve a bloody massacre. They probably said that their troops would quickly enter Kyiv, remove the "junta" and - that's it... Now let's recall the days before the invasion, where it was not yet known for sure on which day of February 2022 the invasion would begin. But then Western diplomats began to be evacuated from the Ukrainian capital, Kyiv..."

Mr. Honchar also mentioned an article published by "Ukrainska Pravda", headlined "The Three Longest Days of February...", which, in particular, describes a visit to Washington by Ukraine’s top diplomat, Dmytro Kuleba, on February 23, 2022.

"On that day, Biden began asking Kuleba questions about the situation in Ukraine, gave some advice and was talking about support. The rhetoric of this conversation was reminiscent of saying goodbye to a child with cancer, rather than encouraging and empowering an ally ahead of a life-or-death battle. That day, Biden said goodbye to all of Ukraine in the person of Mr. Kuleba ," the article read.

In that context, the expert recalls how initial shipments of American weapons began to arrive in Ukraine in December 2021.

"It was important what kind of weapons were arriving – FIM-92 Stinger MANPADS, FGM-148 Javelin ATGMs – that is, the weapons more suited for use in guerrilla warfare... Perhaps, there was a request or wish expressed by the Russian side that the shipments should not be too big and, most importantly, should not include kinetic attack capabilities so that it would not carry a risk of damage to the Russian Federation’s territory. Moscow then drew a red line for Washington. However, this, in fact, did not happen as expected... The Kyiv-in-three-days blitzkrieg had never succeeded. Accordingly, all unofficial plans or agreements that might have existed between the Americans and Russians had collapsed as new realities were arising."

But even after that, the USA was in no hurry to provide our country with more capable weapons, such as artillery guns, in particular, HIMARS MLRS.


This is not ancient history - the facts are still fresh and well-known. Biden/Sullivan bent over backwards to not touch poor little USSR with any of our big sticks and continue to do so.
19   goofus   2024 Jun 5, 5:02pm  

Eric Holder, just in the last week:

https://nypost.com/2024/05/30/us-news/biden-gives-ukraine-permission-to-use-us-weapons-to-attack-russia/

(200 mile range; Moscow is 300 some odd miles from the Ukrainian border)

https://www.reuters.com/world/europe/kremlin-condemns-nato-bosss-appeal-ukraine-use-western-arms-russia-2024-05-27/

(More from NATO about striking deep into Russian territory.)

All your quotes are from 2021- early 2022. We’re talking US and NATO’s rhetoric and green-lighting of long-range weapons NOW. Hardly bending over backwards to not touch “poor little USSR.”

People have posted at length here about Nuland’s 2014 coup and hand-picked leader following the maidan “color revolution.” Remember “fuck the EU” and state department influence on Ukraine ever since? Trump wasn’t supposed to win in 2016 or we’d have been goading Russia much sooner. As it was, it took Biden one year and one month in office to threaten Russia to the point of invasion.
20   goofus   2024 Jun 5, 5:24pm  

Let’s cut through the Ukraine fog. Taiwan would be used the same way, as a proxy pig, to weaken and unseat a nationalistic leader. Both Xi Jinping and Putin are nationalists, and therefore at odds with the WEF, Great Reset types who would weaken sovereignty and coalesce their power. These oligarchs, let’s call them, see the US as useful near-term because of our military. They have no interest in our long-term as a nation, and in fact are openly hostile to traditional Americans, preferring “an unrelenting stream of immigration” per Biden. We’re being used, and our currency will fall once we’re discarded.

Ukraine and bleatings about “democracy” are a smokescreen, as should be clear by now. An estimated 500k dead (and I’ve read much higher), press-ganging unwilling men, and recruiting children, old men, and young women rather than settling for a truce? “To the last Ukrainian,” while canceling elections? Nice democracy. War funding is a loan to be paid back, says the puppet leader, while talking with Fink of BlackRock. What will he pay with, their worthless currency? Their land and resources of course. The poor Ukrainian people couldn’t have had a worse, more duplicitous “ally” than the Biden admin. How do people not see this?
21   RWSGFY   2024 Jun 5, 5:49pm  

How the fuck you "threaten" a strategic nuclear power with a couple of hundred ATGMs given to a neighboring country? Use your brains, people, before you parrot a stupid cunt like McGregor or convicted pedo and stupid cunt like Scott Ritter. USSR has been completely safe all along and not "threatened" in any way. The only real threat for them is our ICBMs.

They would not lose half a mil people killled/wounded, the whole Black Sea fleet and 20+ thou armored vehicles if they simply stayed inside their GINORMOUS territory.

Jeezus!
22   goofus   2024 Jun 5, 5:59pm  

RWSGFY says

How the fuck you "threaten" a strategic nuclear power with a couple of hundred ATGMs given to a neighboring country? Use your brains, people, before you parrot a stupid cunt like McGregor or convicted pedo and stupid cunt like Scott Ritter. USSR has been completely safe all along and not "threatened" in any way. The only real threat for them is our ICBMs.

They would not lose half a mil people killled/wounded, the whole Black Sea fleet and 20+ thou armored vehicles if they simply stayed inside their GINORMOUS territory.

Jeezus!


Their capitol is within reach. You tell me why that might be a threat. Why was the Cuban missile crisis a threat, despite being much further from DC?
23   HeadSet   2024 Jun 5, 6:42pm  

goofus says

USSR has been completely safe all along and not "threatened" in any way.

NATO kept moving east after the USSR fell. Putin tolerated even the former Soviet Baltic States joining NATO, but Ukraine being set up to join NATO was an intolerable threat.
24   goofus   2024 Jun 5, 8:46pm  

HeadSet says


NATO kept moving east after the USSR fell. Putin tolerated even the former Soviet Baltic States joining NATO, but Ukraine being set up to join NATO was an intolerable threat.



Right, Russia’s position made sense, which is why we rarely heard it in US media. John Mearsheimer had good takes early on, but few heard him.
25   fdhfoiehfeoi   2024 Jun 6, 6:41am  

The push towards global conflict(Middle East, Eastern Europe, etc), is undeniable, including the stupid moves towards encouraging nuclear war. This of course impacts the economy. If you don't understand how war is used to de-populate and create national debt, you are ignorant of history. Or you're so blinded by your bias's you let them make you stupid. Ignorance is lack of knowledge, stupidity is denial of facts.
26   Onvacation   2024 Jun 6, 8:10am  

Eric Holder says

not touch poor little USSR with any of our big sticks

Insanity. Russia has big sticks too.

Oh wait! You said USSR! You do know the USSR ended in 1989? Don't ya?
27   Onvacation   2024 Jun 6, 8:13am  

RWSGFY says

USSR

Dude! The cold war is over!
28   Onvacation   2024 Jun 6, 8:15am  

NuttBoxer says

Ignorance is lack of knowledge, stupidity is denial of facts.

Yup
29   FortwayeAsFuckJoeBiden   2024 Jun 6, 11:18am  

bailing out banks, banks hold treasuries, so fed buys losses from banks. how nice of them, assholes!

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