4 ms·

I understand that. However what I don't understand is how the price of the treasury bond falls when there exists a buyer in the market that has an insatiable a

I understand that. However what I don't understand is how the price of the treasury bond falls when there exists a buyer in the market that has an insatiable appetite for treasuries and a Scrooge McDuck sized wallet(The Fed). In economic jargon it would mean we currently have perfectly elastic demand for short term treasury bonds.

spikels 11y ago
Short term rates are directly set by The Fed. (Notice I said "rates" not "bonds". In the jargon "Bonds" have terms of over a year. Bonds are not controlled directly by The Fed - only very short-term rates (typically just a few days).) Long-term rates (i.e. Bond yields) are set by the market in which the The Fed is a major participant but not big enough to completely control the market. This was greatly expanded under the 3 quantitative easing programs but the last of these ended almost a year ago. Also keep in mind that the US bond market is huge - around 40 trillion dollars - with treasuries only about 1/3 of the total. Even after all the extraordinary intervention by The Fed they hold around 10% of that total. China holds less than The Fed and much of that is not is US dollar bonds.
dragontamer 11y ago
http://www.bloomberg.com/news/articles/2015-08-20/citi-the-markets-read-the-minutes-wrong-and-the-fed-will-hike-in-september http://www.bloomberg.com/news/articles/2015-08-20/citi-the-m... http://www.bloomberg.com/news/articles/2015-08-25/citi-the-fed-will-still-hike-in-september-but-there-s-one-big-wild-card-ahead http://www.bloomberg.com/news/articles/2015-08-25/citi-the-f... Fed is sending mixed signals. But recent articles I've seen imply that the Fed is going to be raising rates.
- heapcity 11y ago
  Ever do the jiggle with another person walking in the opposite direction? China & Fed past couple weeks.

4 ms·

I understand that. However what I don't understand is how the price of the treasury bond falls when there exists a buyer in the market that has an insatiable a

by JamesBarney 11y ago

spikels 11y ago
Short term rates are directly set by The Fed. (Notice I said "rates" not "bonds". In the jargon "Bonds" have terms of over a year. Bonds are not controlled directly by The Fed - only very short-term rates (typically just a few days).) Long-term rates (i.e. Bond yields) are set by the market in which the The Fed is a major participant but not big enough to completely control the market. This was greatly expanded under the 3 quantitative easing programs but the last of these ended almost a year ago. Also keep in mind that the US bond market is huge - around 40 trillion dollars - with treasuries only about 1/3 of the total. Even after all the extraordinary intervention by The Fed they hold around 10% of that total. China holds less than The Fed and much of that is not is US dollar bonds.
dragontamer 11y ago
http://www.bloomberg.com/news/articles/2015-08-20/citi-the-markets-read-the-minutes-wrong-and-the-fed-will-hike-in-september http://www.bloomberg.com/news/articles/2015-08-20/citi-the-m... http://www.bloomberg.com/news/articles/2015-08-25/citi-the-fed-will-still-hike-in-september-but-there-s-one-big-wild-card-ahead http://www.bloomberg.com/news/articles/2015-08-25/citi-the-f... Fed is sending mixed signals. But recent articles I've seen imply that the Fed is going to be raising rates.
- heapcity 11y ago
  Ever do the jiggle with another person walking in the opposite direction? China & Fed past couple weeks.