Posted At : March 19, 2009 8:31 AM
Sorry for another update. I should have waited to send my weekly commentary. I’ve already had a few calls on the fed action, and it’s pretty big so I wanted to explain it. Hope it’s of interest.
The Federal Reserve just announced that it will buy $750 billion in mortgage securities and $300 billion in longer-term Treasury bonds to help shore up the financial system. The Fed will initiate a program to purchase longer dated Treasury notes and bonds. The stock market shot higher and bond and mortgage rates shot lower after this announcement. This is important because such a program would serve two purposes:
1. It will boost demand for Treasuries thereby putting downward pressure on rates which is good for the economy
2. Treasury purchases add to bank reserves and the money supply thereby increasing the liquidity in the system.
Regards – Keith Springer