The Debts of the Spenders: Primary Dealers, the Non-Agency Market, and Treasuries

I was doing some weekend reading and came across this insightful piece from Zero Hedge as featured on Naked Capitalism. ZH's article goes a great way towards explaining the recent bond market's wild moves, including the preceding post about Dresdner Kleinwort.

The key takeaway here is the 3 year period. . . .which would put us sometime in 2012 when things collapse. Mayan prophecy anyone?

Primary Dealers are selling corporates in droves in order to purchase Treasuries and MBS under the Fed's gun. Primary Dealers now have a record $368 billion in Corporate, Agency, MBS and Treasury inventory. And the vast bulk of PD holdings of agency debt has less than a 3 year maturity.

The Fed has bought $103 billion in Agencies, almost half of which matures in the next 3 years. Amusingly, the roll coincides when roughly $1 trillion of CRE debt comes due. Good luck.

The Fed has bought $103 billion in Agencies, almost half of which matures in the next 3 years. Amusingly, the roll coincides when roughly $1 trillion of CRE debt comes due. Good luck.

http://www.nakedcapitalism.com/2009/06/
guest-post-collapse-of-non-backstopped.html