Rob Viglione

Bond Expert: Friday Wrap

The Federal Reserve's buying behavior is worrisome, and severely distorting of true economic conditions. Capital is not being allocated wisely, particularly when bureaucrats have virtual blank checks with which to purchase whatever they please.

Continued Fed buying will drive inflation, particularly as they dabble in consumer-backed instruments. Interest rates may remain artificially low, but that only breeds continued malinvestment and will push inflation.

At some point the Fed will have to temper its buying to keep inflation at bay; it's at that point that the debt market will suffer.