andruomail

TIPS Are No Longer a Steal

If you're a bank and take out a fed funds loan from the Fed, that's not a long-term loan, correct? wouldn't it be suicidal for them to buy long-dated Treasuries in this way if interest rates ever rise? I do read this theory a lot though.

> I have another explanation for why the 10 yr is low 3's and the 30 yr is at 4. u.s. banks gave up trying to figure out which resturaunt in town was going to be successful and pay back their business loan and started borrowing at fed funds at close to 0 and buying treasuries yielding 3 and 4%. I think the author is very economically literate but I no longer look at treasury pricing as inflation plus some real return. The fed wanted low rates and figured out a way to get them by manipulating the market. Maybe domestically with u.s. banks and also giving some foriegn buyers incentives to buy treasuries. This drove the yield on treasuries down even though the safe haven appeal of treasuries is waning.

Truth and Consequences of the Fed Purchasing Treasuries

Where are they finding the extra $750 billion of mortgages to buy?? is this the long-awaited bad bank?