The Fed is play practicing again with its term deposit facility doing a $5 billion operation last week, pretending that is getting ready to drain reserves. Meanwhile regular bank deposits at the Fed surged by $108 billion last week. So who is the Fed kidding? Banks simply have nowhere else to go with most of the cash the Fed is printing. They aren’t even buying Treasuries. That’s been a real problem as the Fed acting alone has been unable to keep Treasury prices propped up.

Foreign central banks (FCBs) stepped up their buying a tad this week. They need to do more buying more consistently or else the markets will be in trouble. The timing of bank and FCB Treasury buying cycles is such that they could both top out around the time that the Treasury’s paydowns of $25 billion a week in Supplementary Financing Program (SFP) Cash Management Bills (CMBs) end at the end of March. That cash is currently a prop for the market. The top of the bank and FCB buying cycle could coincide with an important stock cycle high window. Many signs point to March-April as a good time to get out of the market.

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