The Fed Debt Repurchases ReturnUpdate: Or Maybe Not!

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Update: In a surprising turnaround, the Fed has just said it is canceling today's repurchase. The Fed had been expected to release the size of the repurchase at 9:50. And it seems the size is zero. Very odd stuff.
Update II: Anyone know what's going on? There is talk that it some kind of technical glitch screwed things up. (We just got off the phone with someone who was literally shouting "Glitch! Glitch! It's another glitch!") Others saying that the Fed didn't like the kind of bonds the banks were looking to sell. Let us know what you're hearing in the comments below.
Update III: Federal Reserve 'source' telling CNBC that it was a technical glitch and that they will redo the repurchase in an hour.
Update IV: Apparently the Fed will be manually conducting the repurchase. We have no idea what that means. Maybe something to do with Bernanke piloting a helicopter? Or the New York Fed driving around with sacks of money in NYC taxi cabs?
The Federal Reserve announced this morning that it would likely inject more money into the economy today through temporary debt repurchases. The move comes after the Federal Reserve took a one day pause on Tuesday from a series of unusual debt repurchases that began on Thursday.
This morning's announcement that the Federal Reserve is standing ready to buy debt is unusual because typically the Fed doesn't telegraph its repurchases in advance. It seems that the Fed is still concerned with communicating to the markets that they are watching the situation very closely. We don't know how much debt the Fed's plan to buy back today but we do know that they are being unusually open about their plans.
The Fed is saying that this today's repurchases are being made to accommodate "heightened reserve needs" that "typically" arise on a Treasury mid-quarter refunding date. That is to say, they're ready to temporarily buy bonds in order to allow the banks to buy more bonds. Or even: the Fed is lending money so that banks can lend money to the government. In short, they want you to believe that this is not at all in response to yesterday's losses in market indexes or today's hedge fund redemption worries.
[Photo(shop) Credit: Lawrence Lewittin]

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