Wednesday, November 10, 2010

Green Light for a Green Close (one of these days) up to $130 Billion/month in Liquidity Injections

From ZeroHedge:

An Advance Look At The Upcoming POMO Schedule: Up To $130 Billion In Hot Brian Sack Liquidity Injections In A Month
As frequent Zero Hedge readers know, the next FRBNY POMO monetization schedule, in which the fund flow, simply put, is Brian Sack -> Primary Dealers (who collective hold $7+ trillion in debt, more on that soon) -> Steve Jobs, with a bunch of retail hot potato momo handlers suckered in the process, will be announced tomorrow at 2 PM. We can't remember the last time a Fed release was so anticipated, FOMC announcements included: by now even the hot dog dude knows that POMO days are a green light to a green close. So while money will not be put to any use for the next 27 hours, as the only trade is and continues to be levered beta Fed front-running, here is an attempt to forecast what the POMO schedule will look like from Ian Lyngen of CRT Capital.
Ahead of Wednesday afternoon’s NY Fed announcement of the upcoming buyback schedule, we thought it would be useful to compile our ‘guesstimate’ of what one might expect (see attached).

The attached table offers five sceneries from $100 bn to $130 bn and the implications for operation sizes based on 1) QE-1, 2) QE-Lite, and 3) NY Fed’s announced buckets/percentage-targets. 

The consensus for tomorrow’s total schedule is $105 bn: $75 bn of QE-2 plus $30 bn of MBS/Agency prepayment.  If the FOMC wants to front-load the process, we could see up to $130 bn:  $100 bn of QE-2 plus $30 bn of MBS/Agency prepayment.
For those who are gunning for Soros legendary status, and wish to be remembered for taking on THE central bank (and hopefully succeeding), and not that pathetic excuse for a bank that is the BOE, there will be 16 opportunities in just the next month. Incidentally, if December 7 is indeed a POMO day, it may just be the right day to join Europe in its "Pull Money From The Banks" campaign, and take on Brian Sack head on...
Mr. Sack is executive vice president of the Markets Group at the Federal Reserve Bank of New York. He is also the Manager of the System Open Market Account for the Federal Open Market Committee (FOMC).