Fed and Treasury actions this week will help to keep the Liquidity and Monetary Policy Profit indicator (LAMPP) from dropping into red territory this week. The long term LAMPP will remain Green, while the short to intermediate term LAMPPs will remain Yellow.
The Treasury has scheduled net new supply of just $5 billion in debt, an amount that the market typically absorbs easily.
Meanwhile the market gets its mid-month shot in the arm from the Fed’s regular monthly settlement of its purchases of MBS that it buys under forward contracts. These purchases replace the MBS that are paid down every month as mortgage borrowers regularly pay off mortgages each month. The Fed will settle purchases totaling $23.98 billion during the August 14-21 period.