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Not going to attempt to anti-spin this, it's above my head. Maybe someone else will take a stab at it.
http://www.marketwatch.com/story/fed...ays-2009-10-21
http://www.marketwatch.com/story/fed...ays-2009-10-21
As the Federal Reserve nears the end of its $300 billion Treasury-buying program, it hasn't been as effective as initially hoped, said bond strategists at UBS Securities.
The venture was started in March and aimed at limiting increases in yields on government debt as the Treasury Department geared up to sell more debt, said Chris Ahrens, a bond strategist at UBS Securities.
The Fed has roughly $2 billion more to buy under the program after purchasing $1.05 billion on Wednesday. Its final operation will be on next Thursday.
[..]
When launching the program, central bank policy makers said, in a statement after the March meeting, the program was "to help improve conditions in private credit markets."
However, the maturities where the Fed devoted the most attention -- 4.5 to 10 years -- actually cheapened the most since March, pushing yields higher, Ahrens wrote in a research note Wednesday.
Almost half of the debt the Fed has bought has been in that maturity range, he noted. But both 7-year and 10-year yields have increased about 86 basis points since the program was initiated. That's after the 10-year note yields plunged about almost a half of a percentage point to 2.53% on the day the Fed made the announcement. Ten-year notes (UST10Y 3.38, +0.05, +1.38%) now yield 3.41%.
Still, that's not much of an increase in rates considering the continuous expansion of debt issuance and improvement in the economy.
"With all the supply we've had, if the Fed hadn't taken out Treasurys, we would have seen higher rates," said Jeff Given, a portfolio manager at MFC Global Investment. "The headwinds for the economy would have been stronger if the Fed hadn't entered the market."
"It helped, but I wouldn't say it was extremely successful," he added.
For one thing, many expected the Fed's buying would push mortgage rates down enough to spur a big refinancing wave; that never materialized.
Also the Fed announcement in August that it would slow down the Treasury purchases to extend the program through October "had a counterintuitive effect on the market," Ahrens said. Since then, longer-dated debt has rallied, pushing yields lower -- hardly what would be expected as the market braces for the disappearance of one of its biggest and steadiest buyers.
Given that, "we speculate when the purchases cease at the end of this month, it will have little effect on the market," Ahrens said.
The venture was started in March and aimed at limiting increases in yields on government debt as the Treasury Department geared up to sell more debt, said Chris Ahrens, a bond strategist at UBS Securities.
The Fed has roughly $2 billion more to buy under the program after purchasing $1.05 billion on Wednesday. Its final operation will be on next Thursday.
[..]
When launching the program, central bank policy makers said, in a statement after the March meeting, the program was "to help improve conditions in private credit markets."
However, the maturities where the Fed devoted the most attention -- 4.5 to 10 years -- actually cheapened the most since March, pushing yields higher, Ahrens wrote in a research note Wednesday.
Almost half of the debt the Fed has bought has been in that maturity range, he noted. But both 7-year and 10-year yields have increased about 86 basis points since the program was initiated. That's after the 10-year note yields plunged about almost a half of a percentage point to 2.53% on the day the Fed made the announcement. Ten-year notes (UST10Y 3.38, +0.05, +1.38%) now yield 3.41%.
Still, that's not much of an increase in rates considering the continuous expansion of debt issuance and improvement in the economy.
"With all the supply we've had, if the Fed hadn't taken out Treasurys, we would have seen higher rates," said Jeff Given, a portfolio manager at MFC Global Investment. "The headwinds for the economy would have been stronger if the Fed hadn't entered the market."
"It helped, but I wouldn't say it was extremely successful," he added.
For one thing, many expected the Fed's buying would push mortgage rates down enough to spur a big refinancing wave; that never materialized.
Also the Fed announcement in August that it would slow down the Treasury purchases to extend the program through October "had a counterintuitive effect on the market," Ahrens said. Since then, longer-dated debt has rallied, pushing yields lower -- hardly what would be expected as the market braces for the disappearance of one of its biggest and steadiest buyers.
Given that, "we speculate when the purchases cease at the end of this month, it will have little effect on the market," Ahrens said.
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