Detailing T-Bill Purchases

In the post below, we detailed Treasury purchases from the Federal Reserve’s Q3 2009 Flow of Funds report.  Our conclusion is that the buyer comes from the “plug category” of households which bought $167.96 billion.  We are not sure who the real buyer is, but it is not foreigners, banks, mutual funds or brokers as these groups are accounted for by their own categories.

While we cannot pinpoint the real buyer, we do know that “they” are buying T-bills in record amounts.

The first chart shows the bid-to-cover ratio for the 1-month, 3-month and 6-month auctions combined.  It is soaring to well over 4.  The second chart shows the raw dollar amount in bids every week for these same three auctions.  Currently some $400 billion a week is desperate for T-bills.  This is almost double the amount of bids for bills seen a year ago when the flight to quality trade was in full bloom amidst the financial collapse.

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As the next chart shows these bids are getting near 0% interest rates.  So, there is no carry trade possibility with these securities.


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We often hear the argument that money market funds are driving these flows.  As the next chart shows, this group is actually reducing its holdings of Treasuries.  As the chart under that shows, T-bill bids have increased even as money market holdings of T-bills fall.

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Conclusion

Even after looking at the above charts, we still cannot pinpoint the real buyer of Treasuries.  However, we are sure they are buying bills that yield nothing and bidding more and more every week for the privilege to earn nothing.

Category: Think Tank

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

7 Responses to “Detailing T-Bill Purchases”

  1. Thatguy says:

    Is it possible that it’s someone other than the Fed??? How can you write this whole article without even mentioning the Fed.

    I can’t think of anyone else who would be buying bills that yield nothing and bidding more and more every week for the privilege to earn nothing.

  2. davossherman@gmail.com says:

    @ThatGuySays: Yah don’t think Time’s moron of the year would do something like that do you? I mean, wouldn’t that top Turbo TImmy’s definition of a way to let taxpayers profit: Which is selling Citi stock for LESS than the morons et al purchased it for.

    Insane asylums are one thing. Insane asylums run by the insane are another. Being forced to live in the second is totally another.

    It is high time the sane tossed these morons the F*ck out of office!!!!!!

  3. nickgogerty says:

    Looks like Bailout money hard at work to me. Low yield bills etc. – Risk free money= low risk profits. Here is an alternative bet http://nickgogerty.typepad.com/designing_better_futures/2009/12/norwegian-krone-and-gold-overlay.html

  4. leftback says:

    Come off it, there is no way individuals can buy $168B of T-bills without using funds or agents.

    Now, let’s see… who would want to hide their money, or their allocation of funds? Bankers and organized crime.
    Banks, via internal hedge funds and other conduits. Some of the foreign buyers are US banks too, via offshore HFs.

    Some of this could be wealthy individuals stashing cash via asset management, charitable foundations etc.
    Extremely wealthy families are indistinguishable from organized crime in their patterns of asset allocation.
    There was a lot of shadowy movement of money during the early 30s, as the wealthy saw the 2nd leg down ahead.

  5. Jim Bianco says:

    The first sentence … “In the post below” … refers to a post not shown here. In it we detail Fed purchases. T-Bill purchases shown here CANNOT be accounted for by the Fed. And, the Fed stopped buying Treasuries as of October 31 but T-Bill demand kept soaring to hew heights.

    These purchases are domestic and their size is incredible. leftback is correct, they are not indiviudals because they are not using funds or agents. My guess (and it’s only a guess) is it is corporations that are afraid of institutional money markets funds with their cash after these funds had a near death experience last September. If so, remember that everyone thinks corporate treasurers are always correct. So what does it say that corporations are amassing HUGE piles of cash that earn nothing and don’t even want to risk their money in an institutional money market fund???

  6. bobmitchell says:

    Agree with lb and jb

    anyone else seeing a short squeeze on the long bond?

  7. Dave in SW Oregon says:

    It is possible that Corporate Treasury departments are buying direct from the US Treasury.

    https://www.treasurydirect.gov/indiv/TDTour/choose_account.htm

    Most large corporate treas. depts. work hand-in-hand with large banking institutions to manage funds and ensure cash is available for general corporate purposes. The work and planning to schedule purchases against cash flow needs would be overwhelming for many modest to mid-sized firms. These less than top tier firms depend upon their bankers. Certainly don’t look to small and mom-an-pop-shops. They’re the ones crying out for credit and loans.

    How far back does the anomaly go? Beyond the Treasury pulling the money market funds guarantee?

    Just to give a Tin Foil Hat wink to Thatguy… We know the Fed has been lying about lots of things. Why not Ben’s-Bogus-Banknote-Bazaar ensuring that Timmay-ta-Trashury-Tramp doesn’t run out of we-will-gladly-spend-your-great-grandchildren’s-future-as-yet-unborn-labor-hours. Mwahahaha. Future indentured servants. Mwahahaha