Fed will buy $40 billion of MBS a month (for how long?)
Fed funds to be “near zero” until mid-2015
Operation twist continues
Other policy tools “as appropriate”
Bernanke is committed to stimulative policy for a long time, and he is willing to do weird unconventional stuff to encourage growth. SPX up about 0.4% on the announcement.
I know there are some Ron Paul supporters around here…
I’m not too knowledgeable about inflation securities, but just looking at “Inflation Swap” rates. The definition of Inflation Swap is “the Zero Coupon fixed rate leg necessary to build a par swap agains a leg on Zero Coupon CPI appreciation”. So it’s like a market rate for expected inflation. For 3-year, it was about 2.15% before the Fed. Now it’s about 2.2%.
You can find this on BB: USSWIT3 Index.
You can probably find the implied TIPS rate from these, but you will need to incorporate the Treasury rates.
John Deere Stock: 8/17/12 misses top line, surprise lowers full year guidance… plummets, and now look where it is again… what a joke. The Fed has got to put money is the ‘Consumer’s Pocket’.
Seriously, can anyone paint the ‘trickle down’ or the ‘linkage’ to QE3 and how it relates to actually creates real jobs?
Buying mortgage securities will stimulate the housing market, which will help reduces foreclosures. A low Fed Funds rate will keep bank borrowing costs low, which means businesses can borrow for low interest rates. All of this helps “main street” people.
It gets a little bit worrisome when the Fed does so much at once. This seems pretty unprecedented. Asset prices might get inflated and options for future stimulus are greatly diminished. However, it’s erroneous to say that monetary policy does not affect normal people.
He can say what he wants to but reality is the reasons Fed continues the policies are for the reasons I mentioned. We need to keep interest rates low until the economy recovers. Don’t expect obvious tangible benefits for the nest 2-3 years.
but you should model it in immediately to see what happens.
US REITs should be in good shape though. thats my intuition. never looked into US REITs just Canadian, and I don’t like what I see despite Canadian REITs being a leading performer.