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Simple answers to Complex Questions and Complex Answers to Simple Questions. In real life, I'm a Greater-Toronto (Canada) Realtor with RE/MAX Hallmark Realty Ltd, Brokerage. I first joined RE/MAX in 1983 and was first Registered to Trade in Real Estate in Ontario in 1974. Formerly known as "Two-Finger Ramblings of a Forensic Acuitant turned Community Synthesizer"

Tuesday, October 13, 2009

Speculation U.S. Rates to Stay Low, Fed Purchases

Treasuries Rise on Speculation Rates to Stay Low, Fed Purchases
Bloomberg Oct 13 09
By Susanne Walker and Matthew Brown

Oct. 13 (Bloomberg) -- Treasuries rose for the first time in three days as investors bet the Federal Reserve will keep interest rates at an all-time low until late next year and the central bank prepared to buy U.S. debt.
Ten-year notes led the gains after holidays in the U.S. and Japan. Fed Bank of St. Louis President James Bullard said yesterday that a falling unemployment rate is a precondition for an increase in the target interest rate from near zero. The dollar declined to the weakest level against the euro since before the bankruptcy of Lehman Brothers Holdings Inc., reflecting an unwinding of demand for the greenback as a refuge.
“The market is caught in this debate about when and if the Fed will tighten,” said Thomas Tucci, head of U.S. government bond trading at RBC Capital Markets New York, one of 18 primary dealers that trade Treasuries with the Fed. “It’s the idea of withdrawing liquidity and the timing of that. The governors are divided on this.”

snip ...

“It’s a double-edged sword because the weaker dollar is good for exports and the economy, but as a reserve currency you don’t want people losing faith in the value,” said Tucci of RBC. “We’ve seen the reinvestment of dollars in the front end of the curve over the course of the last three months. It has helped to keep the curve steeper.”

snip ...

“Investors are really taking the long view and trying to hedge inflation risk,” said Mihir Worah, who oversees the $15.4 billion Real Return Fund for Newport Beach, California-based Pimco, the world’s biggest bond manager. “That’s the biggest reason why we’re seeing the flows.”


Bernanke said at a Board of Governors conference Oct. 8 in Washington that while “accommodative policies” will be in place for an extended period, the central bank will be prepared to tighten monetary policy “to prevent the emergence of an inflation problem down the road.”


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