Fed Ups the QE Ante: $112 Billion Over Next 30 Days; How Much Will Go to the PIIGS?

From the NY Fed:

Across all operations in the schedule listed below, the Desk plans to purchase approximately $112 billion. This represents $80 billion in purchases of the announced $600 billion purchase program and $32 billion in purchases associated with principal payments from agency debt and agency MBS expected to be received between mid-January and mid-February.

The $7 billion increase from the prior period is composed of $5 billion as part of QE2 ($80 billion, up from $75 billion for the previous period) and an extra $2 billion as part of so-called QE-Lite ($32 up from $30 billion). We checked, and the MBS portion of the Fed's balance sheet is accelerating its drawdown, reaching an all-time high 4 week rolling drawdown of -$30.5 billion, from December 8, 2010 to January 5, 2010. Curious, as this is in the face of rising mortgage rates, where we would expect refinancing and the resulting prepayments to dwindle. There could be a lagging effect, or we could be witnessing Fannie and Freddie accelerating the modification and payoff of delinquent mortgages (in February, 2010, Freddie instituted a policy of automatic paydown of loans delinquent 120 days).

The extra $2 billion for QE Lite might be justified as business as usual from the perspective of the NY Fed, but why the extra $5 billion? RW at EPJ Central recently raised the question, "Is the Federal Reserve Propping Up Europe, Again?" As of last Thursday's figures, the Fed's liquidity swaps with other central banks went largely unused. Not surprising after the grilling Bernanke got in front of Alan Grayson (see below). However, as the Fed's expanding primary dealer list now includes banks housed in every major money printing hot spot, from Switzerland to Japan, the Fed can shovel money anywhere under the radar through it's "normal" money printing operations.

Oh, and as we pointed out last month, the actual amount of money printing is materially more than the pre-announced POMO schedule suggests, because prices paid are materially higher than the par amount reported. Now that the NY Fed publishes prices paid, we know that instead of $105 billion printed in the last 30 days, it was $110.4 billion, brining the grand total of "extra" money printed surreptitiously since November to $16.8 billion. Every billion counts!