With the Fed buying 80bil in bonds per month throughout the rest of 2012, and 40b a month indefintely, what impact do you expect this to have long term (next 18 - 24 months)
With the Fed doing asset purchases aimed at Mortgage Backed Securities it is trying to drive down long term interest rates so that borrowers can access cheaper credit mainly to try to prop up the housing market, which could lead to more jobs. That premise may prove difficult given the fact that these purchases also tend to impact riskier assets, such as stocks and commodities. With stocks hitting new highs it is possible we will see a movement away from government bonds and therefore an increase in long term rates. We saw that today with the 30 yr Bond almost hitting 3% for the first time in the last six months. Time will only tell where long term rates will be, but at some point rates will need to rise.
