How does the Fed move interest rates?

[kmiklas]

“Open Market Operations”

So the Fed, with the Treasury, who together control the money supply, is trading in the market to move rates?

- Is this not market manipulation, pure and simple?
- Is any concept of a free market for US fixed income in the toilet?
- As the most stable currency in the world this moves rates in all other markets.

Anyone else find this to be a little insulting?

Reference: Wild, Russell (2022). “Bond Investing for Dummies.” John Wiley & Sons.

 

[earth_imperator]

The US has weaponized everything, even any First Aid...

 

[Nine_Ender]

“Open Market Operations”

So the Fed, with the Treasury, who together control the money supply, is trading in the market to move rates?

- Is this not market manipulation, pure and simple?
- Is any concept of a free market for US fixed income in the toilet?
- As the most stable currency in the world this moves rates in all other markets.

Anyone else find this to be a little insulting?



View attachment 316967

Reference: Wild, Russell (2022). “Bond Investing for Dummies.” John Wiley & Sons.

Your level of understanding here is very poor. See option #2, it involves no "trading".

 

[2rosy]

macro economics 102. ask a freshman

 

[kmiklas]

Your level of understanding here is very poor. See option #2, it involves no "trading".

Option #2 where? Also, "buying and selling of Treasury and Federal Agency bonds" is trading.

 

[kmiklas]

macro economics 102. ask a freshman

Can you recommend a book that can help me to destupidify myself?

 

[longandshort]

Ah man you took a step back!

Fed changes interest rates through the Discount Rate. This why the FOMC meetings are important, because that’s typically when the Fed communicates it’s interest rate decision (raise, unchanged, cut).

Open Market Operations are when the Fed engages in purchases or selling via quantitative easing/tightening. This is “Fed trading” but they’re not trading like a person does lol, they are injecting or withdrawing liquidity in the system through this (see: bank reserves).

I recommend you look up an intro to macro class on YouTube (a few really high profile professors have shared their lectures there). Here’s a good one: https://youtube.com/playlist?list=PLst1NSKZxFUdaYM0vRTmWScMbt8MGV0aD

 

[mervyn]

The Fed can only decide the overnight interest rate, i.e. this Wednesday.

All the treasury papers, bills, notes and bonds are auctioned and/or traded with the assumption that Fed will maintain its ovenight rate. If not enough participants buying the papers, Fed will step in as the buyer of the last resort, hence QE/QT.

It may not always work. For example, 2v10 years inverted yield curve is getting wider and Fed doesn't have the 2 Year inventory to flood the market and buy back buy 10 year.

https://en.macromicro.me/collections/51/us-treasury-bond/762/us-fed-funds-rate-treasury-bonds-rate

 

[Sprout]

“Open Market Operations”

So the Fed, with the Treasury, who together control the money supply, is trading in the market to move rates?

- Is this not market manipulation, pure and simple?
- Is any concept of a free market for US fixed income in the toilet?
- As the most stable currency in the world this moves rates in all other markets.

Anyone else find this to be a little insulting?



View attachment 316967

Reference: Wild, Russell (2022). “Bond Investing for Dummies.” John Wiley & Sons.

New York Fed
Open Market Operations

Under the radar timeline, some good visuals;
How the Federal Reserve Actually Raises Rates

https://twitter.com/x/status/1586405211739856896

The Great Sovereign Debt Intervention

https://twitter.com/x/status/1586405219805540352

There's another great visual I have somewhere...

 

[spy]

- Is this not market manipulation, pure and simple?

That's exactly what it is. The only open question is whether it is for good or bad and to what degree.

- Is any concept of a free market for US fixed income in the toilet?

Yes and no. Depends on how you interpret the morality of the manipulation and if you choose to participate or resist (passively or possibly even actively; remember China is brazen enough to fly spy balloons over the country). Perhaps now is the time to buy Renminbi or move?

- As the most stable currency in the world this moves rates in all other markets.

Anyone else find this to be a little insulting?

Upon first realization I suppose one might be insulted... or maybe they just laugh. Again, it depends on if you think you got pranked or coerced perhaps.

At least all this is my best interpretation at the time being.