Two Fed presidents hit the alarm over the broken Treasury market
Cartoon courtesy of MichaelPRamirez.com
“In the usual post-FOMC meeting jawboning circus, today we had not one but two Fed officials discussing not the topic du jour – Fed policy errors and soaring inflation – but something far more ominous: the broken Treasury market. Just days after a catastrophic 30Y Treasury auction which may well be the harbinger of what’s to come as the market realizes that tapering is tightening and that without the buyer of first resort we will finally get some price discovery …”
USAGOLD note: Durden gives the full treatment to a significant problem that has been curiously underplayed in the financial media: What happens as a practical matter when the Fed pulls the plug on quantitative easing? To conclude the post, he includes a quote from Bloomberg’s Vince Cignarella we see as going to the heart of the matter. “Frankly,” asks Cignarella, “given the biggest buyer of bonds since the financial crisis is slowing purchases, why would anyone else want them?” What happens, in other words, if the Treasury Department calls a bond auction and nobody shows up?