FOMC Coffee Talk

The FOMC begins a two meeting today where outside of discussing the current economic situation and reviewing all their facilities and the effectiveness of them, the only other major thing left to consider is whether or not to buy long term US Treasuries.

What raises the interest in the discussion is the success so far the UK govt has had in buying Gilts, which has sent yields down to the lowest since at least 1989. The Gilt market however is much smaller than US Treasuries and the Fed would need serious firepower if they were to pull this off in the face of massive supply and right now it doesn’t seem them have the appetite based on comments BUT if they lost control of the bond market due to inflation and supply concerns, they may not have a choice but to give it a try.

It would be nice if one day they let the MARKET do some of the heavy lifting. PPI and Housing Starts are out today. Germany’s ZEW confidence # was better than expected.

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