Here’s an interesting chart we threw together showing the Fed’s ownership of Treasury securities maturing in each year on the curve. There are no bonds maturing in 2032-35 due to the temporary discontinuance of the 30-year earlier in the millennium, which some believe contributed to the housing bubble.
The Fed owns a high of 35 percent of the $60 BN of bonds maturing in 2011, and only 4.4 percent of $142 BN of 2040 bonds. It doesn’t take a MOTU to recognize the potential for massive POMO generated short squeezes on the long-end of the curve, which we have seen and, will not doubt, continue see during this age of quantitative easing.
It will be also interesting to juxtapose the same chart in six months hence when QE2 is under full sail. Stay tuned!
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Do you think the FED has been holding off on the Long end % ownership as a last bullet to control the rising interest rates and there effect on the housing market.
That is to say one day they are able to adjust long term rates by bringing the 30Y fed holdings to a % in line with rest of curve?
Don’t know… Could be they don’t want the duration risk and ding to the balance sheet if rates spike up.
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