Fed OMO schedule vs Treasury Auctions

T

texrex2002

Does anyone have thoughts on these?

In an OMO, is the Fed buying from the primaries? Or placing orders in a bond pit somewhere?

Looks like there's a 30 year auction on August 13th, and a scheduled OMO for maturities up to 30 years on August 12th. Is there a connection between these 2? Is the OMO one day ahead of the auction an attempt to ensure higher prices at the auction?

Also, I guess the fed buys up 30 year notes until the marginal yield is where they want it? so it may take $10B in purchases to get it there, or it may take $900B? Just keep buying until the yield is where you want it?

Wouldn't that actually endanger the following day's auction though? wouldn't there be less demand for lower yielding T bills? or is it really geared more at people who HAVE to buy them to park their cash (no other place to put it), so they get screwed by the Fed driving up rates the day before????

Sorry if this is really elementary to everyone, but I'm starting to become frustrated with how intertwined and obfuscated all this crap is (almost seems like an attempt to bamboozle people trying to figure out the truth of matters).

link to Auction schedule http://www.docstoc.com/docs/8979972/Tentative-Auction-Schedule-of-US-Treasury-Securities

link to OMO schedule http://www.newyorkfed.org/markets/operation_schedule.html
 
Well, theoretically, the schedules are set independently by the Fed for the OMOs and by the US Treasury for the auctions. Which is why it's so convoluted.

The Fed outright purchases are conducted through reverse auctions, where primary dealers can submit offers, on their own as well their clients' behalf. The Fed has the discretion to accept/decline offers the way they see fit. Last I heard, they buy bonds that are cheap on the curve. The amount to be purchased is set and known in advance, so it's not like the bonds will richen massively due to Fed's purchases on the day.

Given all this, everything just works like a mkt normally does. Everyone tries to front-run everyone else and it's all wonderfully game-theoretic. Dealers play games with the Fed and the Treasury, the Fed tries to play fair, funds swim arnd in these murky waters and try to bite chunks out of both the dealers and the Feds.

It's a mkt, 'nuff said...
 
so here is question most people find confusing. where does the fed get the money it uses to buy the bonds with?

(before anyone says i should know, i do know i am raising a rhetorical question to lead to something else. it would be interesting to see your answer all the same).
 
Quote from morganist:

so here is question most people find confusing. where does the fed get the money it uses to buy the bonds with?

(before anyone says i should know, i do know i am raising a rhetorical question to lead to something else. it would be interesting to see your answer all the same).
More...

the money tree. its in the backyard of the whitehouse. fertilized by Obama's dog and guarded by the Loch Ness monster.
 
Quote from niceneasy:

the money tree. its in the backyard of the whitehouse. fertilized by Obama's dog and guarded by the Loch Ness monster.
More...

very funny.

there seems to be a misunderstanding on this forum of what the central bank does. and how it does it.
 
http://www.zerohedge.com/article/open-market-operations-and-statistics

Quote from texrex2002:

Does anyone have thoughts on these?

In an OMO, is the Fed buying from the primaries? Or placing orders in a bond pit somewhere?

Looks like there's a 30 year auction on August 13th, and a scheduled OMO for maturities up to 30 years on August 12th. Is there a connection between these 2? Is the OMO one day ahead of the auction an attempt to ensure higher prices at the auction?

Also, I guess the fed buys up 30 year notes until the marginal yield is where they want it? so it may take $10B in purchases to get it there, or it may take $900B? Just keep buying until the yield is where you want it?

Wouldn't that actually endanger the following day's auction though? wouldn't there be less demand for lower yielding T bills? or is it really geared more at people who HAVE to buy them to park their cash (no other place to put it), so they get screwed by the Fed driving up rates the day before????

Sorry if this is really elementary to everyone, but I'm starting to become frustrated with how intertwined and obfuscated all this crap is (almost seems like an attempt to bamboozle people trying to figure out the truth of matters).

link to Auction schedule http://www.docstoc.com/docs/8979972/Tentative-Auction-Schedule-of-US-Treasury-Securities

link to OMO schedule http://www.newyorkfed.org/markets/operation_schedule.html
More...
 
Quote from niceneasy:

the money tree. its in the backyard of the whitehouse. fertilized by Obama's dog and guarded by the Loch Ness monster.
More...

lol, that's awsome... :D
 
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