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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Mike M2 who wrote (59135)	5/12/1999 2:41:00 PM
From: Knighty Tin	Read Replies (2) \| Respond to of 132070

Chris and Mike, There are two reasons why a coupon pass helps the bond market, sometimes. First, you are taking supply off the market which slightly changes the demand/supply situation from where it was just before the pass. Secondly, since the Fed is buying from banks, it increases cash liquidity, which is good for rates except in inflationary times. Where does the Fed get the money? They make it up. They have unlimited cash to do this, but they can't do too much without worrying about hurting the dollar or raising bond rates by making the dollar too common.