Three failed strikes for the Fed?
Posted By Prieur du Plessis On October 15, 2011 @ 8:40 am In Economy,US | No Comments
It has now been three weeks since the Fed formally announced its $400 billion Operation Twist program on September 12. However, if early indications are a sign of what’s to come, as highlighted by Bespoke Investment Group [1], this will be the third straight time the Fed has tried and failed to lower long-term interest rates through the Treasury market.
Bepoke said: “The chart below shows the yield on the ten-year US treasury going back to September 2008. The red dots in the chart represent each time where the Fed formally announced intentions to buy Treasuries in the open market (QE1, QE2, and Operation Twist). As shown, following each of the prior two announcements, the yield on the 10-year rose by more than 100 basis points (bps) in just a matter of months. Following its most recent announcement in September, the yield on the 10-year is already up 36 bps.
“While one could argue that yield declined ahead of each of the prior announcements due to the fact that each move was widely telegraphed, at face value it appears that the Fed’s attempts to lower long-term interest rates have been futile.”
[2]
Source: Bespoke Investment Group [1], October 14, 2011.
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URLs in this post:
[1] Bespoke Investment Group: http://www.bespokeinvest.com/thinkbig/2011/10/13/three-strikes-for-the-fed.html
[2] Image: http://www.investmentpostcards.com/wp-content/uploads/2011/10/Snap55.bmp
[3] Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.: http://www.feedburner.com/fb/a/emailverifySubmit?feedId=921608&loc=en_US
[4] (What's this?): http://www.wikinvest.com/blogger/wikinvest_wire
[5] Fed Preview: Today's FOMC Meeting Will Prove That Team Bernanke is Out of Ideas: https://moneymorning.com/2011/09/20/fed-preview-todays-fomc-meeting-will-prove-team-bernanke-out-of-ideas
[6] Actually, the Fed IS Going to Start QE3: http://livegoldprices.com/fed-starting-qe3
[7] What did the Fed know?: http://www.wealthdaily.com/articles/what-did-the-fed-know/3318
[8] Federal Reserve: http://www.wikinvest.com/wiki/Federal_Reserve
[9] Wikinvest: http://www.wikinvest.com
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