by Pater Tenebrarum, Acting-Man.com:
Yields Begin to Rise
Over the past two weeks, treasury note yields have risen rather vigorously from a higher low. As a side effect of this, mortgage rates are now increasing in spite of Bernanke’s truly massive purchases in that sector. Note that the Fed is not only adding $40 billion in mortgage related debt to its balance sheet per month, it is also replacing debt that matures. As a result, the purchases have exploded. In fact, the year-to-date purchases of agency debt amount to $345 billion so far, which is a monthly run rate of $69 billion. Together with its treasury debt purchases, the Fed has therefore bought securities amounting to $113 billion per month this year (of course the replacement purchases do not increase the money supply, unless the old purchases were from banks and the new ones are from non-banks).
In any case, there has been a strong increase in yields, in spite of the fact that market-based ‘inflation expectations’ continue to decline in both the US and Europe.
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