How does fed control interest rates?

[wabuffo]

fed has become a big buyer of treasury and agency mbs, and so is definitely providing cash demand (which the fed key stokes on its magic computer)

 

Actually The Fed swaps the US Treasury debt it is buying in exchange for reserves at the banks (even as the bank is just a middleman in the transaction).  In fact, reserves have grown so much (and banks are complaining about that to the Fed), that the US Treasury had to purposely increase its general account from around $400b at the start of the year to $1.6 trillion by mid-year by issuing Treasury debt in excess of its needs/spending so as to remove the excess reserves being created by the Fed.  Thus negating the effect of the Fed trying to corner the Tsy market and turning the Fed's actions into one big circle jerk. Sucking and blowing is the expression that comes to mind.

 

But it gets worse than that for the pinheads at the Fed.  By buying long-dated 30-year bonds and exchanging them for bank reserves, the Fed is torpedoing the govt's attempt to secure long-term borrowing at ultra-low fixed rates (which I don't believe is a US Treasury objective, but what the hey let's go with it for this explanation).  Think about what the Fed is actually doing to the Federal government's consolidated account.  It is swapping long-term 30-year fixed rate borrowing at ultra-low rates for extremely short-term borrowing at variable rates which are low now but may not be low next year.  So much for the government locking in low rates.  Its bonkers as a liability management strategy.

 

wabuffo

[rb]

@cigar

 

fed has become a big buyer of treasury and agency mbs, and so is definitely providing cash demand (which the fed key stokes on its magic computer) to meet issuance supply, thereby lowering long term rates. but my view is that fed cant control long term rates...at some point, you will see long term rates trend up. that point will be when the dollar has become so weak that foreign sovereign funds etc find attractive purchases elsewhere...which is Chairman Xi's fondest wish.  yes, this will become a foreign policy issue, not just a finance issue.

The conventional wisdom is that the FED affects short term rates. That is because historically the Fed has dealt in short term instruments. But technically the Fed can target any point on the yield curve it damn well pleases. That is the point of QE. Take a real market example. Say that the market rate for 30 year funds is 4%. But then a new lender shows up (lets call him Fed) and for one reason or another is willing and able to lend unlimited amounts for a 30 year term at 2%. What's going to be the new market rate for 30 year loans? It's going to be 2%

 

The Fed can do this because it can crowd out anyone out of the market. You can say that I'm a hard core capitalist and I refuse to participate in this madness. Well guess where your money ends up then. At the Fed.

 

Btw, this is purely a domestic affair. The international angle is purely a story for people that don't know how international monetary economics works. Chairman Xi does not have a dog in this fight. He is merely a spectator. Whether he likes it or not, there is nothing he can do about it.

[mattee2264]

I think there are two important aspects.

 

The first as already mentioned is that base rates have an influence on all the other interest rates in the economy. This is indirect and for longer term rates future expectations as to interest rates are more important so for long term rates to stay low markets probably have to continue to believe that the Fed will be able to keep base rates near zero for many years.

 

The second is demand and supply for the various interest bearing instruments. Generally you would expect all the government debt and corporate debt issuance to increase interest rates by increasing the supply of bonds and therefore depressing their price which translates into a rise in interest rates. But the Fed can influence demand indirectly by flooding the system with liquidity some of which will go towards purchasing bonds and directly by buying bonds. And of course the Fed's activities also encourage some speculative activity i.e. buying near zero interest rate bonds in the hope that prices will go even higher and the Fed won't allow them to fall.

 

I think there will come a point at which the Fed loses credibility and markets start to anticipate they will be forced into raising interest rates. That should weaken the first effect and also the second effect by weakening private demand. The question is to what extent the Fed is prepared to override this by stepping up its purchases of debt of all varieties and flavours.

 

The problem is that there is bound to be a huge fiscal stimulus next year which will require a lot of money printing to neutralize. So it is difficult to see any end in sight.

[Cigarbutt]

...

The Fed can do this because it can crowd out anyone out of the market. You can say that I'm a hard core capitalist and I refuse to participate in this madness. Well guess where your money ends up then. At the Fed.

...

Didn't Mr. 'Chuck' Prince say something similar, at some point along the way?

[wabuffo]

This is our fundamental disagreement right here.  If the Fed does QE to the tune of injecting $1,000,000,000,000,000,000,000,000 worth of new reserves and buys literally every asset on the planet, you're saying it will have no effect on bank lending?

 

Reserves are unproductive and illiquid.  The private sector does not want them.  They serve one purpose and one purpose only - clearing payments at the Fed between banks, and between banks and the US Treasury.  Prior to the GFC, the payment systems (Fedwire and CHiPS) could handle $4.6 trillion in payments per day while needing only $5 billion in total banking reserves to do it.  And no payment fails to clear - which is the Fed's job #1.

 

The system worked like this because banks could run a daylight overdraft while waiting for payments to settle and clear.  So they didn't need much in reserves - much the same as you wouldn't need a large balance in your bank account if the bank provided you with an overdraft protection.  All your checks would clear too so long as eventually you got your account to a positive or zero balance.  That's how reserves at the Fed work too - they are a deposit at the Fed in an account for each federally-chartered bank.

 

Today, the Fed has changed many of these rules.  No more daylight overdrafts.  An expansion of the Fed balance sheet which has caused the expansion of bank reserves.  As I said in an earlier post - the only way for banks to get rid of reserves is to convert them to currency.

 

As for lending, banks don't need or use reserves for lending.  The act of extending a loan creates a deposit.  Think of a line of credit.  If the consumer (or business) borrows from the line, the bank now has a loan and a deposit with that consumer (business).  No deposit was required first before the loan could be extended - instead the loan gets extended and a deposit gets simultaneously created.  That's true for all bank lending.  The deposit may move to another bank after the loan is made but if the bank needs reserves to clear that transfer (payment) to another bank it will borrow them.  The real constraint is capital, collateral and bank regulations - not reserves (or even deposits).

 

You keep making this connection of reserves and lending that just does not exist in today's economy.  You also seem to imply that the Fed buying assets and creating more reserves is somehow creating "liquidity" and I'm arguing its just the opposite.  It is reducing liquidity because the Fed is removing from the private sector a more liquid safe asset (Treasury) and replacing it with an illiquid one (bank reserve).  It even hurts lending, since it removes collateral from the system (US Treasuries are the most used source of collateral for the private sector to lend against).

 

Anyway - this is a probably a boring technical point for others here who either don't care or don't understand the monetary system - so I guess I will end it here unless you have some more appetite to discuss it further.

 

wabuffo

[JimBowerman]

 

It is reducing liquidity because the Fed is removing from the private sector a more liquid safe asset (Treasury) and replacing it with an illiquid one (bank reserve).  It even hurts lending, since it removes collateral from the system (US Treasuries are the most used source of collateral for the private sector to lend against).

 

wabuffo

 

Don't fully agree, but lets follow this train of of thought.  The Fed does 100 quadrillion of QE...basically all commercial banks balance sheets are now 100% reserves.  You're saying the commercial banks do nothing because of illuqidity? They don't make any loans?  Does the economy deflate? inflate?

 

I'm just very confused as to why we can't agree even at a high level that massive amounts of QE increase inflation (assuming 0% or negative IOR).  Again, Selgin comment about the weimar republic banks being able to make massive amount of loans to the point where they had no excess reserves (despite. QE being many times higher than now) is relevant, but we don't seem to agree on this basic reading of history?

 

Relevant thread on George Selgin discussing weimar republic etc.  A few other replies to this tweet are also relevant -->

 

 

(I'll also reference a thread we've had before on this same topic :) -->

[Guest cherzeca]

the topic was on rates not liquidity, but this I agree with entirely:

 

"You also seem to imply that the Fed buying assets and creating more reserves is somehow creating "liquidity" and I'm arguing its just the opposite.  It is reducing liquidity because the Fed is removing from the private sector a more liquid safe asset (Treasury) and replacing it with an illiquid one (bank reserve).  It even hurts lending, since it removes collateral from the system (US Treasuries are the most used source of collateral for the private sector to lend against)."

 

hypothecation of treasuries as collateral for repos gets a lot harder when those treasuries held privately goes down as the fed holdings goes up.  this creates a systemic risk in the eyes of some that the financial regulators are blithely ignorant of

[SharperDingaan]

90% (guess) of the time, the various mechanics described work fine.

Then there is the 10% (last 5-10 YEARS) when the tool-box just has nothing up to the task.

 

The fact is that when you (all central banks combined) are the only liquidity provider(s) across the time-horizons, you control both THE LEVEL and shape of THE ENTIRE YIELD CURVE. The only real variable is degree of control - more in the short-end, tenuous in the long-end.

 

At 20 yr, 2% money, new money can only be made by match-funding to build new long-term assets. The issue is that with todays rapid change in technology, the long-term asset has a much higher-than-normal possibility of ending up stranded. But less of a chance if one swings at the fences (SpaceX, Tesla, Starlink, 'green tech', etc), vs just building a bigger/better factory somewhere.

 

Old money has to be made by terming out debt as it matures. Buy XYZ cheap when they can't roll their ST paper (I-banks in a market seize-up), roll into MTN, roll again into LT debt - and just let the equity appreciate as XYZ stabilizes. Asset write-downs and MTM accounting helping to reduce price, and reversed as/when recovery slowly happens. As long as XYZ does not bankrupt, there are lots of ways to play - with the better opportunities in commodities, pharma, and CPG.

 

The underlying issue is employment. New tech doesn't require as many workers, and shifting demand favors the migrant unskilled (doing what machines either cannot, or are not cost effective at). Real problem for an India, or a China with their current large and aspiring younger workforces. But great if you are third world - exporting labor for remittance payments.

 

Point? You are not going to be able to live by simply coupon clipping - you are going to have to take on risk.

Recognize that, position accordingly - and there is a very real possibility of ending up stupid rich a decade from now.

 

Good luck!

 

SD

 

 

 

 

 

 

 

 

 

 

 

 

[wabuffo]

..relevant thread on George Selgin discussing weimar republic etc....

 

Jim - i think what you miss with your model is that you take a view that the Fed (or a central bank) is the centre of the monetary system.  From that you jump to all kinds of conclusions that the Fed is orchestrating behavior when it is not.  The true center of the monetary system as I've explained many times is the US Treasury (or any sovereign currency issuer that spends in its own its own fiat scrip and doesn't link its fiat scrip to (or borrow in) a non-sovereign currency).  The central bank is just the US Treasury's banker - nothing more, nothing less.  Remember US Treasury net spending = new bank deposits/private sector financial assets. 

 

I have never studied Weimar or any other hyperinflation scenario but I would guess excessive spending plus the need to borrow in non-sovereign currencies to make transfer payments to England/France had a lot to do with the resulting inflation (and not "hot potato" reserves).  I think inflation comes from linking excessive spending with a sovereign borrowing in a foreign currency (and here I would add gold as a "foreign currency")  When that link snaps, inflation results.  The US does not peg its currency to anything else and has no need to borrow in foreign currencies - so inflation is very hard to create (though not impossible).

 

I'm repeating myself but growing the Fed balance sheet by forcing excess reserves on banks that don't want them and then not paying any interest on those excess reserves has the opposite effect to what you think it does.

 

I've mentioned its effect on the withdrawal from the private sector of risk-free lendable collateral (US Treasuries) which would directly reduce lending.  But its even more insidious than that.  Low rates punish savers more than they help borrowers.  That is a fact.  If you look at the Fed's household balance sheet survey and look at both the asset side and liability side and then factor in which assets/debts have fixed interest rates and which are variable rate - you'll see this fact.  The effect of low rates is demand destruction as savers get less income from their savings and so they have to save EVEN MORE thus reducing their consumption.

 

Finally, I think about interest expense paid by the Federal government as just another source of income to the private sector.  If we think $600 or $2000 cheques are good for stimulating the economy, then we would want the Federal government to pay higher interest on its debt (and not lower) because that is just another transfer of financial assets to the private sector.  What difference does it make to a sovereign issuer if it pays 1% on its debt as it is raining $600 cheques over the country and instead pays 8% interest with no cheques.  Sure the distribution of that US Treasury largesse is perhaps skewed differently, but in the long run, does it matter?  I don't think so.

 

You know... we've been trying low rates and QE for a long time and not getting the desired result.  What's the definition of insanity - I know it's like that old expression "if you find yourself in a hole, perhaps its time to stop digging"....  or something like that.

 

If you really want to stimulate the economy - I would tell the Fed to stand down and have the US Treasury run high deficits (preferably via low taxes than high spending) and pay high interest rates on Treasury debt (7-10% would be good).  This is basically what we did in the 1980s and it was pretty good.  The US GDP added an amount equal to the entire GDP of West Germany at the time.  Oh and we also tamed inflation.  How about that?  Let's do that.

 

wabuffo

[wabuffo]

Imagine the law were changed such that the Fed reserves you describe -- liquidity-sucking assets useful only for clearing, and thus essentially useless at their current volume -- were permitted to freely circulate, and the only reserve requirements were the relatively small amounts necessary to ensure clearing.  In other words, make all Fed liabilities "Federal Reserve notes" (or their electronic equivalent) rather than the illiquid Federal Reserve deposits you have described.

 

I believe some central banks do exactly this -- issue their own short-term central bank debt, separate and apart from sovereign debt issued by the government's treasury department.  But let's not give our Fed/politicians any ideas.

 

BTW - I really like your description of reserves ("liquidity-sucking assets useful only for clearing, and thus essentially useless at their current volume"). I'm going to steal that term!

 

wabuffo

[Cigarbutt]

...

-The true center of the monetary system as I've explained many times is the US Treasury...

...Weimar or any other hyperinflation scenario...

-Growing the Fed balance sheet by forcing excess reserves on banks that don't want them and then not paying any interest on those excess reserves has the opposite effect to what you think it does.

-You know... we've been trying low rates and QE for a long time and not getting the desired result.  What's the definition of insanity - I know it's like that old expression "if you find yourself in a hole, perhaps its time to stop digging"....  or something like that. (members of my household tell me to "drop the shovel" when they are winning arguments)

-I would tell the Fed to stand down and have the US Treasury run high deficits (preferably via low taxes than high spending) and pay high interest rates on Treasury debt (7-10% would be good).  !!!!! this would translate in 40 to 45% of budget spent on interest !!!!! (the average interest on marketable debt was 1.58% as of last November)

wabuffo

The idea here is to avoid circular arguments, falling in rabbit holes or drifting in ####### discussions. BTW, Have a great 2021.

 

In a way, because of various capital and regulatory rules, it's not only excess reserves that have been forced upon commercial banks, it's also the treasury and agency 'paper' which has been supplied generously lately (some would say exponentially). As of end 2019, only for the government paper, pre-covid...

 

 

Attached is a graph adjusted for size comparison indicating that commercial banks have been forced-fed some stuff that they perhaps could do without but i seem to remember that you reject the notion of crowding out (public debt displacing private investments).

 

FWIW, i've deeply studied the Weimar episode from various angles. TL;DR: The inflation story is fascinating but 'we, haven't crossed that bridge (yet) and if we do, it's not the rise in the money supply that we'll need to worry about.

 

---)Back to does the fed control interest rates: it does until it no longer does (non-linear)

[JimBowerman]

Wabuffo,  if monetary policy is not important and no amount of QE is stimulative, why in the world do we collect taxes?

 

Federal tax receipts are something like 20% of GDP.  Why don't we issue new treasuries in the amt of 20% of GDP every year, and then immediately have the Fed buy up all those new treasuries and store them on the Fed's balance sheet forever?  If no inflation will result, and instead we get deflation, why am I sacrificing so much and paying taxes to the IRS every year? Let's take our free lunch and never collect another dime in taxes! (of course i'm be facetious, and inflation would rapidly rise if we came close to that, but according to your logic, no inflation would result and its a free lunch?)

 

Been a good convo, but we tend to go in circles on this, so will let you have the last word

[wabuffo]

Wabuffo,  if monetary policy is not important and no amount of QE is stimulative, why in the world do we collect taxes?

 

1) Jim, I don't think I ever said that monetary policy isn't important.  I believe you and I just disagree on the mechanics of it and the optimal strategy to be pursued.  You have a central bank viewpoint that I think overstates the limits on what a central bank can actually do given its unattractive "currency".  I view monetary policy on a consolidated federal govt basis (which combines the US Treasury and the Fed and removes the arbitrary barriers in how we think of them as being independent of each other - in my view the Fed is just the US Treasury's bank - a role that I wish it would just stick to instead of the self-important things it thinks it must do).

 

2) Why do we collect taxes?  My view is that we collect taxes because they give value to the sovereign state's fiat currency.  Fiat currency is the only thing the private sector can use to extinguish their tax obligation to the sovereign state.  Thus in order to pay one's taxes, then one needs a supply of the sovereign state's money.  Its like riding a bus - you need bus tokens for a ride.  Therefore the transit authority must run a deficit of bus tokens with the transit users (ie the transit users hold a perpetual surplus of bus tokens).  If the transit authority didn't require bus tokens for a ride, then no one needs bus tokens.  Taxes/money = bus tokens/rides.

 

3) I never said inflation is impossible.  In your example, again you are fixated on the Fed buying treasuries.  Let's make your example simpler - you are advocating running a US Federal govt annual deficit of 20% (regardless of the mix of tax and spend levels).  I never said that wouldn't cause inflation.  It might, it might not.  We've come close this year - probably running a deficit in the high teens (~18-19%) percent of GDP.  During the GFC we also hit the low teens deficit-to-gdp ratios.  Did you see inflation anywhere?

 

Jim - I truly enjoy these technical discussions.  Not many people care about this stuff (which makes them saner than you and I probably...)

 

wabuffo

[rb]

...

The Fed can do this because it can crowd out anyone out of the market. You can say that I'm a hard core capitalist and I refuse to participate in this madness. Well guess where your money ends up then. At the Fed.

...

Didn't Mr. 'Chuck' Prince say something similar, at some point along the way?

I didn't say that there will be no effects from Fed actions. The Fed is obviously doing what is doing because it wants to obtain some effects, not because it's bored. All I was saying is that if the Fed wants to lower long term rates it is totally in its power to do it.

[Cigarbutt]

...

The Fed can do this because it can crowd out anyone out of the market. You can say that I'm a hard core capitalist and I refuse to participate in this madness. Well guess where your money ends up then. At the Fed.

...

Didn't Mr. 'Chuck' Prince say something similar, at some point along the way?

I didn't say that there will be no effects from Fed actions. The Fed is obviously doing what is doing because it wants to obtain some effects, not because it's bored. All I was saying is that if the Fed wants to lower long term rates it is totally in its power to do it.

Fair enough. It just seems the Fed is bound to do more of the same at every turn without retaining the ability to eliminate policies once 'acute' phases quiet down. wabuffo uses a digging hole analogy (a concept i agree with) and one has to hope that the music doesn't stop. There is a there-is-no-alternative flavor and it feels awkward?

Some people suggest that the Dunning-Kruger effect is most at risk with noobs like me and with 'experts' so i wonder?

 

[muscleman]

So inflation -> fed raising rates -> housing price goes down.

Deflation -> fed lowering rates + printing -> housing price goes up?

 

I would think inflation cause housing price and any commodities to go up while deflation would cause them to go down?

[mattee2264]

 

The inflation hedge argument is that historically rents have been able to keep pace with inflation supporting higher house prices (assuming of course that rental yields remain unchanged and supply remains fairly tight).

 

The interest rate argument is that if interest rates go up significantly that impacts on housing affordability and reduces housing demand and therefore house prices. That effect can be offset somewhat if the cause of rising interest rates is strong economic growth which increases household incomes and hence housing demand. But if higher interest rates are in response to cost push inflation then most likely higher costs e.g. food, fuel are squeezing household budgets and therefore lower disposable incomes and higher interest rates will be a double whammy.

 

And in the background rising housing prices create their own demand especially if there is a plausible rationale e.g. inflation hedge. Problem with that idea is that overvalued assets rarely hedge the way they are supposed to.

 

Most likely the Fed will keep interest rates low for as long as possible and will ignore inflation that is moderately above their target dismissing it as temporary or a necessary evil in their attempts to prevent a depression. That will probably continue the housing boom setting us up for another housing market crash in the future.

 

[Cigarbutt]

fed has become a big buyer of treasury and agency mbs, and so is definitely providing cash demand (which the fed key stokes on its magic computer)

Actually The Fed swaps the US Treasury debt it is buying in exchange for reserves at the banks (even as the bank is just a middleman in the transaction).  In fact, reserves have grown so much (and banks are complaining about that to the Fed), that the US Treasury had to purposely increase its general account from around $400b at the start of the year to $1.6 trillion by mid-year by issuing Treasury debt in excess of its needs/spending so as to remove the excess reserves being created by the Fed.  Thus negating the effect of the Fed trying to corner the Tsy market and turning the Fed's actions into one big circle jerk. Sucking and blowing is the expression that comes to mind.

...

wabuffo

https://www.bnnbloomberg.ca/yellen-shift-on-vast-treasury-cash-pile-poses-problem-for-powell-1.1564058

There is a difference between what one says one will do and what one will do but this should be interesting to watch..

If one believes in this reserves management aspect, effectively, the Fed has tested the next move by allowing (over the last few months) its balance sheet (deposits of depository institutions) to get back to where it was last spring. What happens next is conditional on underlying fundamental developments but, whatever scenarios considered, the balance sheet weaning promises to be challenging (from very to extremely). Who cares?

[wabuffo]

The move, which aims to return its cash position at the central bank to more normal levels, will flood the financial system with liquidity and complicate Powell’s effort to keep a tight grip over money market rates.

 

The US Treasury's Quarterly Refunding Statement is where people are getting this idea from:

https://home.treasury.gov/news/press-releases/jy0011

 

During the January - March 2021 quarter, Treasury expects to borrow $274 billion in privately-held net marketable debt, assuming an end-of-March cash balance of $800 billion.

 

The Treasury General Account balance sits at ~$1.6t - so ending March at $800b is a big move with big repurcussions......except I don't believe Yellen!  Why?

 

-------------------------------------------------------------------------------------

Let's go to the previous Quarterly Refunding Statement from November.

During the October – December 2020 quarter, Treasury expects to borrow $617 billion in privately-held net marketable debt, assuming an end-of-December cash balance of $800 billion. 

End of December TGA balance = $1.728 Trillion.

 

 

How about the one before that from August?

During the July - September 2020 quarter, Treasury expects to borrow $947 billion in privately-held net marketable debt, assuming an end-of-September cash balance of $800 billion.

End of September TGA balance = $1.781 Trillion.

 

 

 

wabuffo

[Spekulatius]

The move, which aims to return its cash position at the central bank to more normal levels, will flood the financial system with liquidity and complicate Powell’s effort to keep a tight grip over money market rates.

 

The US Treasury's Quarterly Refunding Statement is where people are getting this idea from:

https://home.treasury.gov/news/press-releases/jy0011

 

During the January - March 2021 quarter, Treasury expects to borrow $274 billion in privately-held net marketable debt, assuming an end-of-March cash balance of $800 billion.

 

The Treasury General Account balance sits at ~$1.6t - so ending March at $800b is a big move with big repurcussions......except I don't believe Yellen!  Why?

 

-------------------------------------------------------------------------------------

Let's go to the previous Quarterly Refunding Statement from November.

During the October – December 2020 quarter, Treasury expects to borrow $617 billion in privately-held net marketable debt, assuming an end-of-December cash balance of $800 billion. 

End of December TGA balance = $1.728 Trillion.

 

 

How about the one before that from August?

During the July - September 2020 quarter, Treasury expects to borrow $947 billion in privately-held net marketable debt, assuming an end-of-September cash balance of $800 billion.

End of September TGA balance = $1.781 Trillion.

 

 

 

wabuffo

 

That was Powell's work, not Yellen's ;D

[Cigarbutt]

wabuffo

OK. Let's take this a step further.

If what they say is true (they will spend more than they borrow):

But for the reserves management theory to apply, not believing is not enough. If the excess reserves were already excessive before, the Fed still aims to keep the bond buying spree going (so contributing to more excess reserves in banks that may have already too much 'liquidity') which means that (for the theory to apply) the TSA account needs to rise (staying the same is not enough) in proportion to bond buying. The Treasury Balance has been coming down since last summer..

Is it possible that they've gone too far?

[wabuffo]

If the excess reserves were already excessive before, the Fed still aims to keep the bond buying spree going (so contributing to more excess reserves in banks that may have already too much 'liquidity')

 

This is actually worse for the banks because it is an asset swap therefore as reserves increase, total assets stay more or less at the same level (unlike Treasury spending which adds both reserves and deposits and increases bank assets (not so fast Wells Fargo! no asset increase for you!)

 

which means that (for the theory to apply) the TSA account needs to rise (staying the same is not enough) in proportion to bond buying. The Treasury Balance has been coming down since last summer.

 

The Treasury used to run (at least since the GFC) an account balance of about $400b - give or take.  So in a worst case scenario one could foresee an additional $1.2t increase in that reserve chart projection. 

 

What the Fed is doing makes no sense whatsoever.

 

 

wabuffo

 

 

 

[muscleman]

I opened this thread back in December because my technical analysis shows a sharp rate spike for the whole year, but I was puzzled how that could happen because FED is supposed to be able to buy bonds to keep the rate low.

So far FED hasn't been able to keep the 10 yr yield low. It was 0.9 back then but 1.3 now. But this is just the beginning. It should continue to rise. I did not trade this because people say "never fight against the FED"