I think they know how much they are printing, and that rates are
rising, while the dollar is falling. So, they want to appear "in control",
while supporting the dollar and bonds through Exchange Stabilization fund
derivative plays. Apparently, wrong statement! So, they had to correct
it -g-.
The market did it for them, so they had to respond. From last week credit
bubble bulletin:
"The interest-rate markets were hit by a bit of reality this week. The December 2004 3-month Eurodollar yield
jumped 36 basis points to 2.615%. The 2-year Treasury yield surged 23 basis points this week to 1.86%, the
highest yield in more than one month. The 5-year yield jumped 19 basis points to 3.33%, while the 10-year yield
increased 14 basis points to 4.39%. The long-bond saw its yield increase 6 basis points to 5.25%. Benchmark
Fannie Mae mortgage-backed yields rose 12 basis points. The spread on Fannie?s 4 3/8% 2013 note increased
1.5 to 43, while the spread on Freddie?s 4 ½% 2013 note widened 1.5 to 42. The spread on 10-year FHLB debt
narrowed 6 to 33. The 10-year dollar swap spread added 0.5 to 43.5."
They know they will have to raise rates, or... Mr. Market will raise rates FOR
them. Even worse, if Mr. Market thinks the Fed is behind the curve, it
will raise rates quite dramatically! Cause... nobody wants to lose money
on fixed income investments. I can't blame them! |
