Fed buying $300B in Treasurys

[sabra]

Source: CNN Money

Central bank also announces it will buy another $750B in mortgage bonds as it tries to get credit flowing again.

NEW YORK (CNNMoney.com) -- The Federal Reserve announced Wednesday it would buy $300 billion of long-term Treasurys over the next six months in order to try and get credit flowing more freely again.

The Fed also announced plans to buy an additional $750 billion in mortgage-backed securities, a move designed to lower mortgage rates.

The Fed suggested it was planning to buy Treasurys in statements issued after the two previous meetings of the Federal Open Market Committee, the policymaking committee of the Fed that sets interest rates. So Wednesday's announcement, which came at the conclusion of the FOMC's latest meeting, was not a major surprise.

Still, stocks turned higher on the news. Bond prices also surged, causing yields on longer-term Treasurys to fall sharply. The rate on the 10-year note fell about 0.3 percentage points immediately after the news to about 2.6%, while the yield on the 30-year note also fell 0.3 percentage points to around 3.6%.(Bond prices and rates move in opposite directions.)

Read more: http://money.cnn.com/2009/03/18/news/economy/fed_decision/index.htm?postversion=2009031814

---

http://www.cnbc.com/id/29755961


Fed Plans to Buy Up Long-Term U.S. Government Debt

The U.S. Federal Reserve on Wednesday, in a surprise move, said it will buy up to $300 billion worth of longer-term U.S. government debt over the next six months and expand purchases of mortgage-related debt to help ease credit market conditions.
CNBC.com

In a statement at the end of a two-day meeting, the central bank's policy panel also said it had decided to hold its target for overnight interest rates in a zero to 0.25 percent range —the level reached in December.

It said rates would stay low for "an extended period," a more explicit vow to stay on hold for a prolonged time.

"In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability," the Fed said.

Prices for U.S. government bonds shot higher and U.S. stocks jumped on the move, with the blue chip Dow Jones industrial average moving into positive territory. The dollar fell sharply.

[marketcrazy1]

1. //

//

[DuaneBidoux]

2. This is the kind of post that will get no attention on DU but it is huge.

They are essentially saying that they are going to print $300 million dollars and buy US debt.

At this point I haven't heard anyone with any knowledge say this can be anything but helpful. We have had so much wealth destruction that we could print a hell of a lot of money with little to no inflationary risk.

If anything the number should have been twice as much. If you are thinking about refinancing and have positive equity in your house I would recommend going for it now!

[Beetwasher]

3. Now? When Would This Affect Mortgage Rates?

I've been holding off on refi because I knew rates would be coming down some more. How low could this push rates?

[DuaneBidoux]

24. It lets the markets know that there is a price floor on mortgage debt.

When you increase demand for mortgage backed securities you raise prices (good old supply demand) and higher prices means lower interest.

If you are one of the lucky ones to have positive value over your loan amount and you are paying over about 5 to 5.5 you will probably want to seriously look at refinancing.

[Winterblues]

26. Rates have actually increased in the last four weeks.

I am in the process of refinancing at this very time and I was told if I had applied three weeks earlier I would have received an interest rate of 4.39%, as it is I will get 5.12% over thirty years. I can't explain why the increase though.

[GoesTo11]

12. The Euro jumped by a nickel after this announcement

That's a big move. Sounds like they're thinking what you're thinking.

[steven johnson]

4. Federal Reserve to Buy $1.2T in Bonds, Mortgage-Backed Securities

Source: washingtonpost.com

The Federal Reserve said today that it will deploy an additional $1.2 trillion to try to lower interest rates and stimulate the economy, an aggressive move aimed at containing the recession.
The central bank will increase its purchases of mortgage-backed securities by $750 billion, on top of a previously announced $500 billion. It also will double its purchases of debt in Fannie Mae and Freddie Mac to $200 billion. Those steps are intended to lower mortgage rates. The announcement of the previous purchases pushed mortgage rates down a full percentage point.
The Fed also said it will buy $300 billion in long-term Treasury bonds, a step it had previously considered but had been reluctant to act on. That move will lower long-term interest rates for the U.S. government directly and, Fed officials hope, will indirectly lower borrowing costs for businesses and individuals.


Read more: http://www.washingtonpost.com/wp-dyn/content/article/2009/03/18/AR2009031802283.html?hpid=topnews

[dethl]

5. And there goes the value of the dollar...

I'm starting to experiment in forex (foreign currency exchange). Just watched my demo account get battered by this (was testing some nifty features though so this was a great test).

[SCantiGOP]

7. that's the danger

the dollar has been holding its value, even appreciating, compared to other currencies. If the value of the dollar starts dropping, China and everyone else may start dumping their billions of US securities.

[jordi_fanclub]

6. Funny "plan" indeed...

Issuing Treasuries to buy... Treasuries. :banghead:

[girl gone mad]

8. quantitative easing.

didn't work in Japan.

[twitomy]

9. I really dont like this fiat money system

So what basically is going on is; the Federal Reserve(Fed) is creating money out of nothing (becasue they can), and then they loan that money to the Treasury. The Treasury in return gives the Fed a interest bearing note..So somewhere down the line our kids will be burdended with paying back that money to the Fed with interest, money the Fed created out of THIN AIR!..Is this not a scam or what!??

Around 40% of the national debt is owed to the Fed. I say tell the Fed to shove it and reduce our
national debt by that amount. The Fed will be out nothing since they invested nothing. (ie. created money out of thin air)

[progressoid]

10. So, they are just going to print some extra cash huh?

[LeftHandPath]

11. Punish the savers...

This is all designed to get the debt bubble going again. It is all they know.

Welcome to the end of America folks. When the bond market collapses, and it will collapse, the cost of our debt will skyrocket. There will be no more SSI, or Medicare, and we will not be able to fund our military.

This is the end game. Either it works, or its game over.

All to save the insolvent bankers.

[DuaneBidoux]

23. printing cash does not inflate the debt bubble--it deflates the debt bubble.

Just borrowing, as we have done for the necessary stimulus does inflate the debt bubble.

Printing money does the opposite. Don't forget, we have had over $7 trillion dollars of money disappear into thin air. Putting $1 trillion back will hardly cause any problems at all.

Theoretically, this could cause inflation down the road (which is also another way to get out of debt), but we have lost so much real wealth that that is likely to be the last problem we face, at least for a long time.

[UpInArms]

13. Fed to buy Treasuries; pump $1 trln into US economy

Source: Reuters

WASHINGTON, March 18 (Reuters) - The Federal Reserve on Wednesday said it would pump an additional $1 trillion into the U.S. economy to try to pull it out of a deep recession, partly by buying longer-term government debt for the first time in more than 40 years.

In a statement at the end of a regular two-day policy meeting, the central bank's panel said it would buy up to $300 billion in longer-term Treasuries.

The decision caught many off guard. While the Fed has said it was considering such a move, it had seemed to be backing away from it recent weeks. As recently as March 6, New York Fed President William Dudley had said such a move would not be the most efficient way to ease market conditions.

The surprise announcement jolted markets. U.S. stocks shot higher and yields on U.S. government bonds took their biggest one-day tumbled since 1987, while the dollar plunged to a two-month low against the euro.

"When the Fed said it would 'employ all available means' to jump-start the recovery and prevent deflation it wasn't kidding," said Sal Guatieri of BMO Capital Markets in Toronto.

In addition to purchasing Treasury debt, the Fed said it would expand by $850 billion to $1.45 trillion an existing program to buy debt and securities issued by mortgage finance agencies.

Read more: http://www.reuters.com/article/bondsNews/idUSN1834336920090318?sp=true

---

:scared:



the dollar lost 2 1/2% of its value today on that news

[skoalyman]

14. jump-start the recovery and prevent deflation

we already seen deflation next stop inflation all aboard

[MrPerson]

15. Where is it getting the $ from?

[Demeter]

16. Thin Air

Welcome to the wonderful world of fractional reserve banking. This is your printing press, whipped into action. Better buy a wheelbarrow to haul your petty cash around in.

[UpInArms]

17. iou's from the treasury

meaning the taxpayer will get another $1 trillion shaft

btw - it takes 33,000 years to have one trillion seconds

[NeoConsSuck]

18. As Ralph Kramden used to say...

a mere bag of shells.

It is unbelievable how much damage has been caused by Wall Street 'talent' and the banking industry. Remember, these are the people that feel entitled to their million dollar bonuses while we 'little people' toss and turn at night wondering what happened to our plan of retiring on our 401k's.

And the freeptards call Obama a socialist. If only he was. At this point, unregulated capitalism is an utter failure.

[originalpckelly]

19. "The spice, err, credit must flow."

[neverforget]

20. I'm sure this will end well.....

[bemildred]

21. So the snake is definitely eating it's own tail now. nt

[unkachuck]

22. more free money?

....How do I join the Capitalist Party?....the Federal Reserve, this unelected clique of capitalists are doling out 300 billion more imaginary taxpayer dollars to their fellow capitalists (details in secret, of course) without Congressional authorization to,

"...promote economic recovery and to preserve price stability,..."....oh yeah, and maybe we could build a monument to enshrine our capitalists as the countrys' sole economic fuck-up authorities?....bernanke uber alles!!

....hey bennie, that's a neat trick, how did you do it?

[Javaman]

25. I find this all so very amusing considering china just whined to us about

our t-bills. funny how that works, huh?

who's in charge here?

[tyrant888]

27. Buying means more cash

More cash in the system means inflation is around the corner.

[No Elephants]

28. FWIW, if anything, a Harvard U. economics prof was on Charlie Rose a couple of nights ago saying

that the thing to do right now is just keep printing money until no one wants anymore.

Dummya and his policies took the wheels off the damn world. Our troops, the Middle East, the environment, science, the economy, our reputation, etc., etc. etc.