A great day if you’re a money printer

View Comments

It’s a Fed day but there is surprisingly little enthusiasm about the decision.

Economists are sheepishly gathered around an $85 billion monthly asset purchase program — $40 billion MBS and $45 billion Treasuries.

The second part of the equation is the intriguing part. The $45 billion in new purchases would replace Operation Twist, which ends on Dec. 31.

Bullard argues that it will take less than $45B to replace Op Twist, he thinks $25B in new purchases is enough. There are also questions about liquidity in the long-term bond market with the Fed holding $1.65 trillion in Treasuries.

Bullard makes good points and another one is that the Fed seems positively bubbly about the effects of its MBS buys so far, with some members even taking credit for the the recent uptick in housing.

The enthusiasm for MBS buys raises the risk that the Fed could increase monthly purchases to $50 billion while adding $25-35B in Treasuries.

The knee jerk reaction to lower Treasury buys will be higher yields and higher USD/JPY.

Author: Adam Button

Adam Button is the managing editor of ForexLiveâ„¢. He was previously the chief currency strategist at XForex and has also worked with Intermarket Strategy. Adam believes there's an edge in knowing every tidbit of news. He was formerly the head of the markets team at the Canadian Economic Press and is a graduate of Ryerson University. Adam lives in Montreal, follow him on Twitter: @FX_Button.


All|Americas|Central Banks|Featured|Regions

Adam Button

One Comment

  1. Just came from their beds and … american traders are now again on sleeping mode …..on their desks.


© Copyright 2015 ForexLive™  |  Advertise With Us  |  Login To Comment  |  Sitemap

HIGH RISK WARNING: Foreign exchange trading carries a high level of risk that may not be suitable for all investors. Leverage creates additional risk and loss exposure. Before you decide to trade foreign exchange, carefully consider your investment objectives, experience level, and risk tolerance. You could lose some or all of your initial investment; do not invest money that you cannot afford to lose. Educate yourself on the risks associated with foreign exchange trading, and seek advice from an independent financial or tax advisor if you have any questions.

ADVISORY WARNING: FOREXLIVE™ provides references and links to selected blogs and other sources of economic and market information as an educational service to its clients and prospects and does not endorse the opinions or recommendations of the blogs or other sources of information. Clients and prospects are advised to carefully consider the opinions and analysis offered in the blogs or other information sources in the context of the client or prospect's individual analysis and decision making. None of the blogs or other sources of information is to be considered as constituting a track record. Past performance is no guarantee of future results and FOREXLIVE™ specifically advises clients and prospects to carefully review all claims and representations made by advisors, bloggers, money managers and system vendors before investing any funds or opening an account with any Forex dealer. Any news, opinions, research, data, or other information contained within this website is provided as general market commentary and does not constitute investment or trading advice. FOREXLIVE™ expressly disclaims any liability for any lost principal or profits without limitation which may arise directly or indirectly from the use of or reliance on such information. As with all such advisory services, past results are never a guarantee of future results.