Today and tomorrow?! Get out!
Can you ever remember a less-eagerly awaited meeting of the FOMC? With rates already near zero, the thinking is that there is no where for them to go. In-terms of traditional monetary policy, that is true, but as we’ve been told by Ben Bernanke and his Merry Men (and Women), that the Fed still has a number of tools to bring to bear should they need to. The one tool that could be on the horizon is the buying of Treasury debt.
10-year notes have backed up about 60 bp in recent weeks and the Fed could try and limit their rise as they try and leep mortgage rates low, among other objectives. Steady to lower Treasury yields would be welcomed by foreign holders of billions of the stuff and would presumably be a modest plus for the dollar, at least to the extent that it would limit fears of the “Treasury bubble” bursting anytime soon.
