Pam and Russ Martens — Why Isn’t the Justice Department Bringing Treasury-Rigging Charges Against Wall Street?

Primary dealers.

Wall Street On Parade
Why Isn’t the Justice Department Bringing Treasury-Rigging Charges Against Wall Street?
Pam Martens and Russ Martens

Michael Fleming, Frank Keane, and Ernst Schaumburg — Primary Dealer Participation in the Secondary U.S. Treasury Market

The recent Joint Staff Report on October 15, 2014, exploring an episode of unprecedented volatility in the U.S. Treasury market, revealed that primary dealers no longer account for most trading volume on the interdealer brokerage (IDB) platforms. This shift is noteworthy because dealers contribute to long-term liquidity provision via their willingness to hold positions across days. However, a large share of Treasury security trading occurs elsewhere, in the dealer-to-customer (DtC) market. In this post, we show that primary dealers maintain a majority share of secondary market trading volume when DtC trading is taken into account. We also use survey data on large dealers to characterize activity in the DtC market and discuss some of the gaps in the available Treasury trading volume data.

FRBNY — Liberty Street Economics
Primary Dealer Participation in the Secondary U.S. Treasury Market
Michael Fleming, Frank Keane, and Ernst Schaumburg

John Jansen — Probe of Primary Dealers Widens

Via the WSJ: 

Federal prosecutors and the top U.S. commodities regulator have asked banks to turn over information in connection with a broad probe into whether their traders rigged auctions on government debt, according to people familiar with the matter.

Banks are in the process of providing details to prosecutors at the Fraud Section at the Justice Department, as well as investigators at the Commodity Futures Trading Commission, the people said.

Across the Curve
Probe of Primary Dealers Widens
John Jansen

Michael Fleming and Collin Jones — Dealers’ Positions and the Auction Cycle

The aftermath of the financial crisis and changes in technology and regulation have spurred a spirited discussion of dealers’ evolving role in financial markets. One such role is to buy securities at auction and sell them off to investors over time. We assess this function using data on primary dealers’ positions in benchmark Treasury securities, released by the New York Fed since April 2013 and described in this earlier Liberty Street Economics post.…

FRBNY — Liberty Street Economics
Dealers’ Positions and the Auction Cycle

Michael Fleming and Collin Jones

Bloomberg: Wall Street Bond Dealers Whipsawed on Bearish Treasuries Bet

Via Bloomberg: 

"The surprising resilience of Treasuries has investors re-calibrating forecasts for higher borrowing costs as lackluster job growth and emerging-market turmoil push yields toward 2014 lows. That’s also made the business of trading bonds, once more predictable for dealers when the Fed was buying trillions of dollars of debt to spur the economy, less profitable as new rules limit the risks they can take with their own money."

Shouldn't be "surprising" unless you don't understand the operations. Didn't anyone learn from Japan?

"While they’ve ratcheted down their forecasts this year, they predict 10-year yields will increase to 3.36 percent by the end of December. That’s more than 0.6 percentage point higher than where yields are today."“My forecast is 4 percent,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank AG, a primary dealer. “It may seem like it’s really aggressive but it’s really not.” 

4%? Uh, ok good luck with that one. 

Seems like Matt Franko's prior analysis, that bond dealers hate the low rates and want to push for higher ones, is correct.  

"The biggest dealers are seeing their earnings suffer. In the first quarter, five of the six biggest Wall Street firms reported declines in fixed-income trading revenue.New York-based JPMorgan, the biggest U.S. bond underwriter, had a 21 percent decrease from its fixed-income trading business, more than estimates from Moshe Orenbuch, an analyst at Credit Suisse, and Matt Burnell of Wells Fargo & Co. Citigroup, whose bond-trading results marred the New York-based bank’s two prior quarterly earnings, reported a 18 percent decrease in revenue from that business. Credit Suisse, the second-largest Swiss bank, had a 25 percent drop as income from rates and emerging-markets businesses fell. "

Sadly the article makes no distinction between the nature of US government paper and corporate paper. Any further thoughts?

system failure — An example of how the banking cartels control countries — the Greek case

Sounds like pretty much the same system as the US. Looks like the global banking cartel has a lock on government finance worldwide, capturing governments in its net, and the same bad actors are still at it, only this more consolidation at the top.

the unbalanced evolution of homo sapiens
An example of how the banking cartels control countries — the Greek case
system failure

Michael Fleming — Information on Dealer Activity in Specific Treasury Issues Now Available

The New York Fed has long collected market information from its primary dealer trading counterparts and released these data in aggregated form to the public. Until recently, such data have only been available for broad categories of securities (for example, Treasury bills as a group) and not for specific securities. In April 2013, the Fed began releasing data on some specific Treasury issues, allowing for a more refined understanding of market conditions and dealer behavior.

FRBNY — Liberty Street
Information on Dealer Activity in Specific Treasury Issues Now Available
Michael Fleming

Carola Binder — Potential Costs of Asset Purchases

How insiders think.

Quantative Ease
Potential Costs of Asset Purchases
Carola Binder | graduate student at UCAL Berkeley

Zero Hedge — Guess Who Is NOT "Rotating" Out Of Treasurys

Credit where credit is due.

Spoiler: It's the PD's.

Zero Hedge
Guess Who Is NOT "Rotating" Out Of Treasurys
Posted by Tyler Durden

Cullen Roche on Peter Schiff

I just read this at Euro Pacific Capital, Peter Schiff’s company. He says we should eliminate the debt ceiling so our creditors can cut us off:

“Such a development may be the shock therapy our creditors need to finally cut us off for good. If that occurs, interest rates in the United States could finally rise to more rational levels. A significant increase in the cost of borrowing will create the mother of all fiscal cliffs. It’s too bad that Tim Geithner can’t see that one coming.”

This is not correct. Schiff misunderstands the design of our monetary system....

Pragmatic Capitalism
Eliminating the Debt Ceiling Wouldn’t Cause Interest Rates to Surge
Cullen Roche