Interest Rate Roundup

Wednesday, November 04, 2009

Fed keeps "extended period" language, slightly cuts agency debt plan

The Federal Open Market Committee just released its latest interest rate decision and statement. Rates were left unchanged, as expected, at a range of 0% to 0.25%. The Fed also held onto its language pledging to keep rates low for an "extended period." One minor surprise: The Fed said it would reduce the size of its program to buy agency debt to $175 billion from the previously announced $200 billion. The Fed said the move "reflects the limited availability of agency debt." It kept its MBS buying program target at $1.25 trillion. The vote for the policy actions was unanimous.

UPDATE: Treasury yield curve steepening on this news. 2-year yields down 1 basis point, 30-year bond yields up 6 basis points. Implication is that no Fed move raises longer-term inflation risk.

UPDATE2: Lack of dollar defense sending Dollar Index to day's low, off 65 bps to 75.65. NOT a new low yet, but if this sell off gains momentum, look out. Gold is flying, incidentally, up $12 to just shy of $1,100 an ounce.


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