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>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 a
by 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 agoBut 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.