• 745 days Will The ECB Continue To Hike Rates?
  • 746 days Forbes: Aramco Remains Largest Company In The Middle East
  • 747 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 1,147 days Could Crypto Overtake Traditional Investment?
  • 1,152 days Americans Still Quitting Jobs At Record Pace
  • 1,154 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 1,157 days Is The Dollar Too Strong?
  • 1,157 days Big Tech Disappoints Investors on Earnings Calls
  • 1,158 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 1,160 days China Is Quietly Trying To Distance Itself From Russia
  • 1,160 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 1,164 days Crypto Investors Won Big In 2021
  • 1,164 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 1,165 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 1,167 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 1,168 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 1,171 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 1,172 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 1,172 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 1,174 days Are NFTs About To Take Over Gaming?
Another Retail Giant Bites The Dust

Another Retail Giant Bites The Dust

Forever 21 filed for Chapter…

Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

  1. Home
  2. Markets
  3. Other

Fed's Effort To Roll Snowball Uphill Is Failing

Bernanke thinks he can manipulate treasury yields by purchasing long dated treasuries. He can't. The market is simply too big. Please consider Treasurys slide after Fed purchases.

Treasury prices slipped lower Monday, with longer-term debt reversing earlier strength, after the Federal Reserve purchased $2.53 billion in Treasurys maturing between 2019 and 2026.

Investors remained wary of buying before the Treasury Department auctions $59 billion in new debt this week.

Fed purchases last week did little to keep Treasury yields down, as equity gains and data revived some optimism among investors. A dismal monthly payrolls report on Friday was better than the even grimmer report some investors had braced for.

Ten-year note yields increased 15 basis points last week, pushing back towards levels last seen before the Fed surprised markets after its last policy meeting by announcing it would purchase $300 billion in Treasurys in the following six months.

"The Fed's problem is that the market realizes that $300 billion in Treasury buybacks is just a drop in the bucket compared to $2.5 trillion in estimated net Treasury issuance this fiscal year," said strategists at UBS Securities.

$TNX - 10-Year Treasury Daily Chart

UBS has it wrong. The Fed's problem is that it cannot force rates where it wants no matter how many treasuries it buys, short of owning them all. If the Fed is buying treasuries at an unnatural price, supply will be unlimited. For more on this line of thinking, please see Quantitative Easing Begins; "Operation Twist" Revisited.

 

Back to homepage

Leave a comment

Leave a comment