Fed Decision: Will Reinvest MBS, QE 1.999 Is Here As $250 Billion More In Debt Monetizations On Deck

Tyler Durden's picture

For immediate release

Information received since the Federal Open Market Committee met
in June indicates that the pace of recovery in output and employment has
slowed in recent months. Household spending is increasing gradually,
but remains constrained by high unemployment, modest income growth,
lower housing wealth, and tight credit. Business spending on equipment
and software is rising; however, investment in nonresidential structures
continues to be weak and employers remain reluctant to add to payrolls.
Housing starts remain at a depressed level. Bank lending has continued
to contract. Nonetheless, the Committee anticipates a gradual return to
higher levels of resource utilization in a context of price stability,
although the pace of economic recovery is likely to be more modest in
the near term than had been anticipated.

Measures of underlying inflation have trended lower in recent
quarters and, with substantial resource slack continuing to restrain
cost pressures and longer-term inflation expectations stable, inflation
is likely to be subdued for some time.

The Committee will maintain the target range for the federal
funds rate at 0 to 1/4 percent and continues to anticipate that economic
conditions, including low rates of resource utilization, subdued
inflation trends, and stable inflation expectations, are likely to
warrant exceptionally low levels of the federal funds rate for an
extended period.

To help support the economic recovery in a context of price
stability, the Committee will keep constant the Federal Reserve's
holdings of securities at their current level by reinvesting principal
payments from agency debt and agency mortgage-backed securities in
longer-term Treasury securities.1 The Committee will continue to roll over the Federal Reserve's holdings of Treasury securities as they mature.

The Committee will continue to monitor the economic outlook and
financial developments and will employ its policy tools as necessary to
promote economic recovery and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke,
Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A.
Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K.
Tarullo; and Kevin M. Warsh.

Voting against the policy was Thomas M. Hoenig, who judges that
the economy is recovering modestly, as projected. Accordingly, he
believed that continuing to express the expectation of exceptionally low
levels of the federal funds rate for an extended period was no longer
warranted and limits the Committee's ability to adjust policy when
needed. In addition, given economic and financial conditions, Mr. Hoenig
did not believe that keeping constant the size of the Federal Reserve's
holdings of longer-term securities at their current level was required
to support a return to the Committee's policy objectives.

And whooooooosh:




10 Year: 2.80%...... 2.78%......2.76%......2.75%

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
John McCloy's picture

   Well now we can all stop wondering. Wonder if it will be sell the news now that we have clarity. Looks to me like Bears have been on the sidelines simply waiting for a decision.

johngaltfla's picture

As I said in the other thread:


The 2/10 yield curve would flatten.


Da bitch has flattened like Senator Robert Byrd's EKG.


Now we're going to see compression in the markets where the 2 sticks around 0.50% and the 10 dives down to test 2.25-2.5% yield levels.

equity_momo's picture

Fed just jumped the shark. All credibility gone. Gold blue sky this month. >1500 by year end. And im not even a gold bug , im just stating how this is going to go down. JPM are going to have to short the output of South Africa and China combined to keep a lid on this.

LeBalance's picture

Become flexible.

Grab ass.

Kiss it, Goodbye.

(but we knew that along time ago).

NotApplicable's picture

It's too late to become flexible.

Question is, can one remain flexible?

Semper Gumbious

Rusty_Shackleford's picture

It took me a second, but that was funny.  Thanks.

DoChenRollingBearing's picture

Agree with Rusty 100%.  Truly funny.  Great minds here at ZH.

Buy gold!

Take $500 (or local currency) from the ATM Thursday!  "Let's Deflate the Bitchez!"

MonkeyMan's picture

Black Friday to follow - the 13th will be unlucky for some. I call crash.

-Michelle-'s picture

Too funny.  That's the second time I've seen that today and on two wildly different forums.

Eternal Student's picture

Thanks for that crappy advice, LeBalance. I tried it and got slapped.

rapunzel's picture

grab ass kiss it
whoooosh hee-ha

oklaboy's picture

what a croc of chit

Andy_Jackson_Jihad's picture

S&P up 5+ points in seconds based on a bad economic outlook.

assumptionblindness's picture

Any news that borrowing costs (bonds) are going to remain low is beneficial to the S&P companies who are waist-deep (and soon to be neck-deep) in debt.

SheepDog-One's picture

'SWOOOOSH'!! Trademark that quick! Oh wait...

FASB 666's picture

Hoenig was that 4th dentist who just never believed in flouride

Anonymouse's picture

I think the quote you are looking for is "4 out of 5 dentists surveyed recommended sugarless gum for their patients who chew gum".  I think that would make Hoenig (in your analogy) dentist #5 (who apparently recommended taffy).  I don't think the analogy holds.  It's Bernanke giving out the candy.  Consequences be damned

GoinFawr's picture

Machoman: I respectfully disagree.

And special thanks to ZH for being so quick on the draw with these bulletins <removes hat>


Anonymouse's picture

Bernanke to China:  Screw you.  We'll buy our own bonds.

assumptionblindness's picture

China to Bernanke:  Since you are buying treasury bonds, how about buying some of the ones that we are selling.  XOXO

GoinFawr's picture

China to China: Hell, let's take a lesson from the US and buy our own bonds


LeBalance's picture

for just a leetle while.

SteveNYC's picture

I mean, let's really think about this:

1) Government is financed via a "bank" that prints it little pieces of paper (or digits) that it can use to "pay" for its shit. Government issues IOU's to said "bank"

2) Millions all over the world get their asses out of bed every day to slave for said paper/digits. In this case, the slaves trade labor for said "paper" that said "bank" prints and gives to said Government

3) What happens when said slaves become aware of said scam?

Geoff-UK's picture

4)  Guillotines appear.  Federal Reserve employees surreptitiously burn their IDs in fireplace and bury the ashes.  Tell neighbors they worked for Federal Employee Credit Union.

StychoKiller's picture

It will probably get to the point where anyone with a "Federal" employer is gonna be watched VERY closely!

DaveyJones's picture

) Chinese General Says U.S. Provocation Risks Economic Response

"Aug. 10 (Bloomberg) -- A Chinese general said U.S. plans to send a nuclear-powered aircraft carrier to the Yellow Sea may lead to retaliation from China, the biggest foreign holder of Treasuries.

"Imagine what the consequence will be if China’s biggest debtor nation challenges its creditor nation," Major General Luo Yuan, deputy secretary general of the People’s Liberation Army Academy of Military Sciences, wrote in an editorial today in the state-controlled English-language Global Times

StychoKiller's picture

China to US: "Put that big D!ck in your pants, no one wants to see it!"

greased up deaf guy's picture

dow to infinity... AND BEYOND!!!  (facepalms all around)

etrader's picture

Its  Havenstein all over again.

LeBalance's picture

Havenstein was kindergarten compared to this baby.

In the circles of gov-owned eCONomists, they do try to one up the big boy on the block.

Gets them a belt knotch at the Bohemian Grove.

flacon's picture

> "and will employ its policy tools as necessary to promote economic recovery and price stability."




The Federal Reserve is like a numbing agent, so that when you burn you hand you don't feel the pain -- until it's too late. 

Sudden Debt's picture

market should end green today! ALL HAIL BB!


and Rome burned.....

nwskii's picture

and gold is  turning green

Lazarus Long's picture

whiskey tango foxtrot thank god i don't have children that will be fighting in the next war

Lazarus Long's picture

yes i know and ready for it,this one will actually be justified

Geoff-UK's picture

The war won't be middle class against ruling class/Federal Reserve employees.  That'll come after.

I'm guessing, when Obama has to pick an enemy to distract Americans from their emptied out 401-Ks, Venezuela will get the nod.  They have oil, after all.

freshman's picture

Someone once said: " The Fed will NOT monetize the federal debt". Who was that guy that said it?

NotApplicable's picture

Maybe he meant he won't monetize it with real money, because they are instead using that extra $1.5T in proceeds from earlier auctions to fund the current "demand?"

I might just hit my home refi target rate sooner than expected.

curbyourrisk's picture

ASSHOLES!  Everyone of them.....  EVEN Hoenig.  If he was that adamant about his feelings he would resign his post and officially come out in favor of auditing the FED.

freshman's picture

No no no, we need him there and one day make him the Chairman when everyone else resigns.

No Mas's picture

You know, if one pays heed to the advice produced by ZH, one will lose out on many, many opportunities to make money in the market.

Why do you guys so fight the fed.  It seems everyone here knows the fed is going to inflate asset prices; why doesn't this site play up the earnings potential afforded by this reality?