FYI - observations on the FED's prospective treasury purchases.
46% of purchases the next 6 months will be in maturities of 5.5 -
10 years. which is known as a 'duration' match to the majority of
issuance of mortgage backed securities. basically they will be
trying to keep mortgage rates low or even lower (IMHO targeting 3%
mortgages would be within the realm of possibility). only 4 % of
their purchases will be in the 17 - 30 years range, which will lead
to a further flattening of the yield curve to ~15 years. thus wider
spreads from 10 - 30 years on the horizon. keeping long term rates
( 10- 30 years) low will be secondary to the low rates on shorter
maturities. this infers 50% of purchases will be in maturities
under 5 years. T bill rates of .11% will continue to be the norm as
will 1.5% or lower 1 year cd rates. Inflation concerns are booted
down stream, FOMC continue to battle fears of deflation or more
logically disinflation. bottom line, without any' flight to
quality' fears, inverse bond ETF's could well outperform. IMHO.
hope you found some of this useful. Bottom line, don't fight the
FED.
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FOMC - treasury purchases
Posted by hazbin1 on 4th of Nov 2010 at 07:44 am
FYI - observations on the FED's prospective treasury purchases. 46% of purchases the next 6 months will be in maturities of 5.5 - 10 years. which is known as a 'duration' match to the majority of issuance of mortgage backed securities. basically they will be trying to keep mortgage rates low or even lower (IMHO targeting 3% mortgages would be within the realm of possibility). only 4 % of their purchases will be in the 17 - 30 years range, which will lead to a further flattening of the yield curve to ~15 years. thus wider spreads from 10 - 30 years on the horizon. keeping long term rates ( 10- 30 years) low will be secondary to the low rates on shorter maturities. this infers 50% of purchases will be in maturities under 5 years. T bill rates of .11% will continue to be the norm as will 1.5% or lower 1 year cd rates. Inflation concerns are booted down stream, FOMC continue to battle fears of deflation or more logically disinflation. bottom line, without any' flight to quality' fears, inverse bond ETF's could well outperform. IMHO. hope you found some of this useful. Bottom line, don't fight the FED.