3 ms·

> Interest rates are driven by the supply and demand of credit. Supply outstrips demand now. While that's somewhat true, its also largely dictated / controlled

• aguyfromnb 7y ago
  >This means the overnight lending rate, U.S. bond rate, etc. The overnight lending rate is set by the Fed, yes. Treasuries are sold in the market. Although an initial auction price is set, the rates will fluctuate based on demand for the bonds. I don't deny the Fed are a major influence on rates, as it's a major component of their mandate now. However, the market can "agree" or "disagree" with those rates and set corresponding rates however they choose.
  • 0x445442 7y ago
    But your missing the key part. Sometimes if the Fed sets rates too low and there's not enough demand for the bonds the Fed buys the bonds thus keeping the interest rates artificially low.
    • aguyfromnb 7y ago
      >Sometimes if the Fed sets rates too low and there's not enough demand for the bonds the Fed buys the bonds thus keeping the interest rates artificially low. Yes, it's how the Fed conducts monetary policy. Can you name the last time that US treasuries were under-subscribed? Greek bonds have lower rates to US treasuries; which would you rather own? On a relative basis, how can one claim that US interest rates are "too low"?
      • AnimalMuppet 7y ago
        > Can you name the last time that US treasuries were under-subscribed? Yes, a couple of months ago.
• iudqnolq 7y ago
  You're both right. The Fed is a lender (to banks only) and carries out what they call "open-market operations" with the goal of enacting policy and not making money. They throw around enough money to skew the market.