What Happens to A Stock Exchange Without Federal Reserve POMO Manipulation?
Back in 2010, when few still dared to question that the entire move in the market is predicted by the Fed’s daily POMO (then still on QE2), we laid out, in a way so easy even a caveman could grasp it, how every tiny move in the stock market is nothing but a function of the Fed’s daily POMO on those days in which Bernanke would be directly injecting liquidity into the capital markets using his Primary Dealer frontmen. Since then nearly three years have passed, and thousands of POMO days. All of which brings us to this quarter’s Treasury refunding presentation, and specifically the section “Effects of policy and market structure” from the Presentation to the Treasury Borrowing Advisory Committee, in which we learn that we had in fact been right all along, and that perhaps for the first time ever, the Treasury admitted that not only “no one dares fight the Fed” but that, as expected, it is “all POMO.”
There, hidden on page 26, or slide 76 of 100, where the Treasury discusses “The Impact Of Monetary Policy”, the biggest “conspiracy theory” of all becomes merely the latest conspiracy fact. First, for corporate bonds…
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What Happens to A Stock Exchange Without Federal Reserve POMO Manipulation?
