Is The Fed Buying Bonds?
When you first read the headline of the article below it is cause for some excitement. At the same time, treasuries are not what move interest rates lower. Although treasuries finished the day better up 72 basis points mortgage-backed securities (this is what moves interest rates) were only up 22 basis points. That is a large spread.
The Wall Street Journal reported that Treasurys ended strong after the Federal Reserve intervened in the market for government bonds and agency securities. The purchases Monday came as part of the central bank’s efforts to lower borrowing costs and increase credit via buying of the two classes of securities. The Fed bought $7.37 billion in Treasurys and $5.15 billion in agency debt. That was a fairly weighty haul in a day where there were no reports on economic data and most overseas markets were closed. Stocks spent much of the day in negative territory before evening out at the close, which made bonds look good as a haven investment.