Fed says economy needs $600B bond-purchase program...haha

[da-net]

I apologize for the link not working in my previous post. I do not know what happened from my pc to ET, but here is the pdf again and I am also attaching a link to an article that might make some of you rethink your posts as it relates to the federal reserve dollars.

http://www.voanews.com/english/news...t-Business-Leaders-Say-Not-Yet-114475409.html

 

[Martinghoul]

Quote from shortie:

my question: why is Fed purchasing shorter-terms bonds since it apparently is hurting the housing market?

Iz complicated, this... Do you really want to know?

 

[shortie]

Quote from Martinghoul:

Iz complicated, this... Do you really want to know?

sure, an analysis from the expert would be nice. i hope i can grasp the gist of it.

 

[Martinghoul]

Quote from shortie:
sure, an analysis from the expert would be nice. i hope i can grasp the gist of it.

Well, I wouldn't call myself an expert and I can offer an opinion of sorts, rather than proper analysis.

Essentially, the tradeoff is between being able to affect the long end of the curve, which can help the housing mkt, vs taking on an excessive amount of duration. Lots of duration in your portfolio implies things that some people on the FRB don't like. Firstly, it means that you have a lot of sensitivity to mkt interest rates. Secondly, it REALLY complicates your exit strategy (which is what every hawkish CBanker is really worried about). If most of your holdings are shorter-dated, you can just sit on them long enough that they simply mature.

So, given a) the Fed had already done a lot for the housing mkt in the first round of QE; b) there are some people on the Board that would likely rebel at the idea of QE2 going into the long end of the curve, the specific implementation of QE2 was a compromise. There's a lot more you can say about the subject, generally, but this is my Z$2c.