Treasury and Fed Put Out Cash, Raising Fist Pumping Crowd for Ben

The market waltzed through a week of heavy Treasury auction supply, but it did not have to pay the piper until Friday and Monday, May 2, when all the new paper was due to settle. Thursday's settlement actually saw bills paid down by $11 billion. That and $16 billion in POMO gave the markets plenty of juice for Ben's coming out party. The US Government, just like Colonel Kadaffy, sent out wads of cash to its minions to insure that cheering, fist pumping crowds would show up for Ben's appearance before the scripted, adoring mob of ink stained wretches. It was sickening. And I'm not even talking about the so called reporters in the room with him. I'm talking about the security market apparatus. Anyone who dared protest that the market show had gone too far was beaten to a pulp. Even venerable bear David Rosenberg of Gluskin Sheff was cowed into submission. Friday and Monday the market has a big pile of new paper to settle. We have to wonder whether having spent every last penny they had in propping things up earlier in the week, the dealers have anything left come Monday. The markets "should" sell off, if not today, then Monday. The indirect bid at the auctions continues to weaken, suggesting that foreign central bank (FCB) players continue to withdraw from the game, but the Fed's custodial data on FCB holdings went the other way, showing an explosion of FCB buying the prior week.