Federal Reserve Surreptitiously Buys Half of Last Week’s 7-year Bond Auction ?

• My suspicion is that this has been going on for some time now. The FedRes are probably buying through quite a few proxies. Those who believe everything is ok and green shoots are appearing everywhere need to re-examine their reality. The rumour going around is that China has pulled the plug and will not be buying treasuries any more. It also implies that they will be selling their existing hoard of treasuries. Is this the reason Tim Geithner lost his cool recently? Is this why Bernanke has been stuttering and stammering? Karl Denninger reports :
    
  Mad props to both Zerohedge and Chris Martenson for noticing this; I missed the facts buried in the CUSIP list. The upshot: The Fed bought nearly half of LAST WEEK’S 7 year Treasury Issuance TODAY.
   
  Huh?  Remember, after the 5 year auction that went badly (and which I wrote about) the 7yr auction went “well.”  Rick Santelli (and a lot of other people) agreed – demand was strong.  That made no sense to me at the time, coming one day after a near-failure in the 5 year.
   
  Well now we know what happened: The Fed pretty clearly pre-arranged, either explicitly or by “suggestion”, that the Primary Dealers take up the auction with the promise that The Fed would immediately monetize half what the Primary Dealer’s took!
   
  Folks, this is beyond bad - it is pernicious and outrageous conduct by The Federal Reserve in conspiracy with the Primary Dealers, both of which are now desperately trying to prop up the US Government Bond Market through subterfuge rather than just buying up the bond issue from Treasury when originally put to the market!
   
  If you think the economy and credit markets are “on the mend” why would The Fed do something like this?  It would not be necessary unless The Fed was told (by those very same Primary Dealers) that they were going to be unable or unwilling to take down any more Treasury Debt.
   
  Folks, let me be clear: The United States HAS OFFICIALLY HIT THE TREASURY DEBT WALL and The Fed and Treasury are engaged in subterfuge and conspiracy in an attempt to hide this from the market. There is no other explanation for what just happened. None.
    
  When it sinks in to the market’s consciousness - we had two failed Treasury Auctions last week, both 5 and 7 year, yet we intend to try to borrow ANOTHER $400 billion next quarter and nearly $100 billion this coming week - the consequences could be extremely severe.

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