Fed Extends Twist Through End Of 2012, Prepared To Take Further Action

[Letsbereal]

Fed Extends Twist Through End Of 2012, Prepared To Take Further Action, Market Unhappy
20 June 2012, by Tyler Durden (Zero Hedge)
http://www.zerohedge.com/news/fed-extends-twist-through-end-2012-prepared-take-further-action

As always, Goldman Corzined anyone who listened to its call that an epic QE is coming.

Fed did the worst possible outcome for risk- merely extended Twist, just as the credit market predicted it would 3 weeks ago:

• FED SAYS IT IS PREPARED TO TAKE FURTHER ACTION `AS APPROPRIATE
• FED TWIST EXTENSION TO SWAP $267 BLN OF TREASURIES BY END 2012
• FED TO SELL OR REDEEM `EQUAL AMOUNT’ DEBT DUE 3 YEARS OR LESS
• FED TO BUY TREASURIES DUE IN 6 TO 30 YEARS AT `CURRENT PACE’
• FED SAYS EMPLOYMENT GROWTH `HAS SLOWED’
• FED SAYS INFLATION HAS DECLINED, REFLECTING OIL
• FED REITERATES ECONOMY `EXPANDING MODERATELY’
• LACKER DISSENTS FROM FOMC DECISION

This means that soon Primary Dealers’ entire balance sheets will be filled with the entire inventory of Fed 1-3 year bonds.

Market not happy.

[larsonstdoc]

  More fed games to keep America afloat.

[Letsbereal]

Breakdown of new $267 billion Operation Twist plan
20 June 2012, by Steve Goldstein - Washington (MarketWatch)
http://www.marketwatch.com/story/breakdown-of-new-267-billion-operation-twist-plan-2012-06-20

The Federal Reserve's $267 billion extension of its Operation Twist program will have:

32% of purchases between six and eight years,

32% between eight and ten years,

4% between 10 and 20 years,

29% between 20 and 30 years and

3% in TIPS.

The program of bond buys and bond sells of securities three years and under will run through the end of 2012.

[Letsbereal]

Bernanke Signals More Easing Likely if Job Growth Wanes
21 June 2012, by Caroline Salas Gage and Joshua Zumbrun (Bloomberg)
http://www.bloomberg.com/news/2012-06-21/bernanke-signals-more-easing-likely-if-job-growth-wanes.html

Excerpt:

Chairman Ben S. Bernanke is signaling the Federal Reserve will probably add to its record stimulus should the economy fail to make sufficient progress in creating jobs for 12.7 million unemployed Americans.

The policy-setting Federal Open Market Committee yesterday extended its Operation Twist program and will swap $267 billion in short-term securities with longer-term debt through the end of 2012.

Fed officials also downgraded their forecasts for growth and employment while noting “significant downside risks” to the economy.

Bernanke, speaking at a Washington press conference, said policy makers are focusing “primarily” on the outlook for jobs in deciding whether to ease further, and more action would be needed without “sustained improvement in the labor market.”

Payrolls grew at the slowest pace in a year in May, and the jobless rate has been stuck above 8% since February 2009.

“If job growth doesn’t pick up from the recent soft readings in the next few months, then the Fed would likely do more and do a full scale asset-purchase program,” said Dean Maki, chief U.S. economist at Barclays Plc in New York and a former Fed economist.

“They’re prepared to take further action.”

U.S. stocks slipped after the Fed cut its estimates for growth and Bernanke said progress in the labor market has slowed.

[Kilika]

This is one of the biggest problems...

Now China can buy into US banks, 'cause the Fed says so.

Federal Reserve allows Chinese-controlled banks to take stakes in US banks

 The Federal Reserve has approved applications by three big Chinese government-controlled banks to set up branches and take stakes in US banks after deciding they were adequately regulated in their home market.

The US central bank said Industrial and Commercial Bank of China (ICBC), the biggest bank in China and 70.7pc owned by the government of China, will become a bank holding company.

In addition, China Investment Corporation (CIC), an investment vehicle set up by the Chinese government to invest its massive foreign exchange reserves, and another company that CIC controls called Huijin Investment will be allowed to become bank holdings companies.

They will become holding companies by taking control of The Bank of East Asia in New York, the first time a Chinese bank has been approved to acquire a US bank. (cont.)
 

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9256036/Federal-Reserve-allows-Chinese-controlled-banks-to-take-stakes-in-US-banks.html

(article at the Washington Post already been wiped.)