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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: orkrious who wrote (103544)	5/28/2009 1:47:19 PM
From: pogohere	2 Recommendations Read Replies (1) \| Respond to of 110194

Yes, that's what the markets seems to be saying. However, I try not to underestimate how important control is to the Fed and what it will do to try to keep it. So many times in the past I've felt "this is it, they've lost control," only to see a trend that was obvious be obviated by Fed action. Underestimating the effect of the tools at the Fed's disposal has cost me some money.

To: orkrious who wrote (103544)	5/28/2009 11:22:12 PM
From: Perspective	Read Replies (3) \| Respond to of 110194

I'm not sure they can realistically do much about long-term rates. I do think they're set up for a correction here - but - keep in mind that in order to press down 30-day interest rates, the Fed has to pony up an amount of money equal to 30 days of the interest differential they're trying to enforce. Now consider what they have to do in order to stuff 10-year rates the same amount. 10 years X 365 days = that's a hell of a lot of money to print for the same effect at the long end of the curve. 3650/30 = over 120 times more expensive! I think they could succeed in the mortgage arena because they sought to narrow a psychological risk premium with their actions. They can't succeed in treasurys because their very actions INCREASE the inflationary/devaluation risk premium associated with the bonds. `BC