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Started By
Message
Fed keeps buying bonds at $85 billion monthly pace
Posted on 6/19/13 at 1:23 pm
Posted on 6/19/13 at 1:23 pm
LINK
quote:
WASHINGTON (Reuters) - The Federal Reserve on Wednesday said it would keep buying $85 billion in bonds per month and gave no explicit indication that it was close to scaling back the program, despite intense market speculation it could soon start drawing it to a close.
4
Posted on 6/19/13 at 1:28 pm to OnTheBrink
Nobody was expecting them to taper this meeting. The key was the change in language, which was that the outlook for growth is a little better and labor is showing "further improvement". 5 basis point spike up in the 10-year though, we'll see how the next few rounds of job figures are before they even start talking about actually tapering.
Posted on 6/19/13 at 1:31 pm to BennyAndTheInkJets
The Dow's reaction...
ETA: Updated....
ETA: Updated....
This post was edited on 6/19/13 at 1:59 pm
Posted on 6/19/13 at 1:39 pm to OnTheBrink
Posted on 6/19/13 at 1:44 pm to OnTheBrink
In the FOMC statment it also reitierated that the federal funds rate will remain at 0 to 1/4 as long as unemployment remains above 6.5% and inflation is below 2%.
Overall, very similar statment to the last few, with a continued purchase of 45B / month of long term treasury securities and 40B / month of MBS.
Overall, very similar statment to the last few, with a continued purchase of 45B / month of long term treasury securities and 40B / month of MBS.
Posted on 6/19/13 at 2:05 pm to LSU0358
The Fed Funds target rate will be at 0.25% for at least the next 2 years, more than like 3.
Posted on 6/19/13 at 2:06 pm to BennyAndTheInkJets
quote:
BennyAndTheInkJets
What's the market doing? Computers can't make up their mind?
Posted on 6/19/13 at 2:18 pm to OnTheBrink
Market does not like this news Dow down 150.
Posted on 6/19/13 at 2:21 pm to BennyAndTheInkJets
quote:
The Fed Funds target rate will be at 0.25% for at least the next 2 years, more than like 3.
That has been my thought as well. I think the first step will be backing off the MBS and treasury purchases.
Interesting thing is that if you look at the Economic Projections that came out with the statement today they project 6.5 - 6.8% unemployment and 1.4 - 2.0% inflation in 2014. This is a fairly significant issue as this is the first time any of the Fed projections have had that happening so soon.
I've been thinking 2015 before the candy bowl gets taken away, but could be as early as mid-2014 if the Fed projections come true.
Posted on 6/19/13 at 2:30 pm to LSU0358
quote:
I've been thinking 2015 before the candy bowl gets taken away, but could be as early as mid-2014 if the Fed projections come true.
Can you explain the metaphor please?
Posted on 6/19/13 at 2:52 pm to Bear Is Dead
45 billion / month in long term treasuries and 40 billion / month in mortgage backed securties. Also, the fed funds rate is at 0 to 0.25% (this is the rate that the fed "loans" money to depository institutions (aka big banks) loan money to each other.
When the "candy bowl" gets taken away the Fed will slow down/eliminate the Treasury and MBS purchases and start to raise the funds rate.
When the "candy bowl" gets taken away the Fed will slow down/eliminate the Treasury and MBS purchases and start to raise the funds rate.
Posted on 6/19/13 at 3:02 pm to Bear Is Dead
I dont get the sell off.....he said he was still gonna print....did i miss something? Why is the dow down 200 pts
Posted on 6/19/13 at 3:04 pm to ThaBigFella
I don't get it either BigFella. After it came out, the market went down 0.5% then up 0.5%, then down 0.5% and stayed down. And is still going down. 
Posted on 6/19/13 at 3:07 pm to OnTheBrink
Good news is bad news, bad news is good news, good news is good news and bad news is bad news. It is all f'd up. The 10 year went nuts today.
Posted on 6/19/13 at 5:02 pm to ThaBigFella
Nothing missed, just more consolidation. Also had a huge move down in bonds with a dollar spike.
Posted on 6/19/13 at 9:41 pm to LSU0358
Dow futures under 15000 now, tomorrow isn't gonna be pretty
Posted on 6/19/13 at 11:00 pm to OnTheBrink
quote:
I don't get it either BigFella. After it came out, the market went down 0.5% then up 0.5%, then down 0.5% and stayed down. And is still going down.
Had more to do with the long term plan he basically spelled out which was that the money faucet will eventually be turned off
Posted on 6/19/13 at 11:12 pm to GenesChin
bubble has to pop sooner or later
Posted on 6/19/13 at 11:30 pm to I Love Bama
quote:
bubble has to pop sooner or later
Seemed to me that a lot of people were expecting a longer timetable on how long it would last. Also, a number of people basically operate on status quo till told to not do that anymore. If you can't predict the fed, just go based off their last words which I think was that they wouldn't scale back till 2015 or 2016
Posted on 6/20/13 at 2:59 am to OnTheBrink
I'm no expert and would like to get anyone's input on the following as background information.
One way of looking at GNP is GNP = Money Supply (M2) X Money Velocity (M2V).
GNP and M2 are calculated from observable data but M2V is indirectly calculated as M2V = GNP / M2.
(Stay with me, my head hurts too...)
Here is M2, Money Supply: Fed Data.
Here's M2V, Money Velocity: Fed Data.
Ok, here we go. Please jump in any time.
Inflation has two components, Money Supply and Money Velocity. You have to have both to create inflation. We can see from the graphs why we are having such low inflation currently. The Supply is there thanks to the QE, but the Velocity is at historically low levels. All that money has not gotten out of the banks. For those fans of Japanese deflation, this should look familiar.
Currently, the Fed has two main policies working: the Zero Interest Rate Policy (ZIRP) and the QE. The ZIRP is a standard tool of Central Banks, QE is not. QE is extraordinary. So it may be assumed that QE will be tapered down first, leaving the ZIRP in place longer.
But to avoid deflation, the Money Velocity must be increased. That means the Fed must make it more expensive for the banks to hold the money than to put it into circulation. This requires rate increases which will cause some inflation. But it depends on relative Money Supply. Just as we have no threats of inflation currently due to lack of Velocity, with the tapering of the QE funding, the Money Supply should drop, thus (hopefully) keeping inflation under the Fed's control.
This is too simplistic but it is food for thought. It could be a scenario that Chairman Ben thinks of when he drinks too much coffee. The current market? Well, The Herd is confused. As the previous poster allowed, good news is bad, bad news is good. But long run, this bull market has all the elements to continue until Velocity turns the corner and starts to increase.
Your thoughts / criticisms welcomed.
One way of looking at GNP is GNP = Money Supply (M2) X Money Velocity (M2V).
GNP and M2 are calculated from observable data but M2V is indirectly calculated as M2V = GNP / M2.
(Stay with me, my head hurts too...)
Here is M2, Money Supply: Fed Data.
Here's M2V, Money Velocity: Fed Data.
Ok, here we go. Please jump in any time.
Inflation has two components, Money Supply and Money Velocity. You have to have both to create inflation. We can see from the graphs why we are having such low inflation currently. The Supply is there thanks to the QE, but the Velocity is at historically low levels. All that money has not gotten out of the banks. For those fans of Japanese deflation, this should look familiar.
Currently, the Fed has two main policies working: the Zero Interest Rate Policy (ZIRP) and the QE. The ZIRP is a standard tool of Central Banks, QE is not. QE is extraordinary. So it may be assumed that QE will be tapered down first, leaving the ZIRP in place longer.
But to avoid deflation, the Money Velocity must be increased. That means the Fed must make it more expensive for the banks to hold the money than to put it into circulation. This requires rate increases which will cause some inflation. But it depends on relative Money Supply. Just as we have no threats of inflation currently due to lack of Velocity, with the tapering of the QE funding, the Money Supply should drop, thus (hopefully) keeping inflation under the Fed's control.
This is too simplistic but it is food for thought. It could be a scenario that Chairman Ben thinks of when he drinks too much coffee. The current market? Well, The Herd is confused. As the previous poster allowed, good news is bad, bad news is good. But long run, this bull market has all the elements to continue until Velocity turns the corner and starts to increase.
Your thoughts / criticisms welcomed.
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