Howcome the yield on US bonds is low now there is no QE?
Submitted by Jannn on 09/01/2011 16:53 -0400
Howcome the yield on US bonds is low now there is no QE?
Jan
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I'm a newb in markets but my take is that No QE > negative outlook on equities > flock to "safe haven" treasuries > drive yields lower?
I did some research and came up with another theorie. Banks lend from the Fed with 0 interest and buy treasuries with 2 %. Its a small profit but its f*cking easy.
Also the Fed holds down yields by selling put options. http://www.youtube.com/watch?v=ZnZnkaq8Nf8
The official US CPI is 3.something per cent (unofficial 9 %). Thats a negetaive real interest rate on the treasuries with a yield of 2 %. No "real" investor would buy this.
J
It's actually even a bit worse. What they do is borrow from the fed, buy the debt at auction, and then a portion of that debt is purchased by the Fed, at a premium. So, basically, they get paid twice, risk free. Loaning money to individuals is waaaaaaaay less profitable.