WASHINGTON, DC-Worried that the economic recovery has stalled, the Federal Reserve Bank will be stepping up its investment in government debt. The decision was made during a one-day meeting, held on Tuesday, in which Fed officials came to the conclusion that the recovery is weaker than it had anticipated during its last meeting in June. It will use the interest it is earning from expiring mortgage-backed securities to buy Treasuries that are maturing in the next two to 10 years.
Last year and in the beginning of 2010, the Federal Reserve brought considerable firepower to the market, buying $1.25 trillion in mortgage securities, $175 billion in mortgage debt from the GSEs and $300 billion in government debt.
Treasury prices, not surprisingly, rallied after the Federal Reserve made its announcement--particularly those with five-to-seven-year maturity dates. The tactic is also expected to put some downward pressure on mortgage and corporate debt rates.
Continue Reading for Free
Register and gain access to:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.