Tuesday, September 22, 2009

Bond Fundamental Shift on the Horizon

Not sure if this horizon is near or far, but it will be an interesting experience when we get there.
Sources say the Fed is in secretive talks with bond
to restart "reverse repurchase agreements" in an effort to siphon
some of the $1T-or-so it's pumped into the economy. Unused since last December, reverse repos take cash out of circulation when the Fed sells securities to its 18 primary dealers for a set duration.
(source: SeekingAlpha).
So if the Fed is delivering inventory into the system, and the Federal Government is issuing new inventory into the system, how exactly are interest rates supposed to stay low for an extended period if this horizon is not equally far away?

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