Housing neutral for Fed doves; Operation Twist running on empty

October 24, 2012

A slightly bigger than forecast 5.7 percent rise in sales of new homes in September reported by the National Association of Realtors on Wednesday lends credibility to September’s jump in housing starts, but appears neutral for Federal Reserve monetary policy discussions.

What the Fed twisteth, Treasury issueth away

June 22, 2012

So much for policy coordination. Just days after the Treasury published a note touting its progress in lengthening the average maturity of its outstanding bonds, the Fed decided to extend Operation Twist – a policy aimed at doing the exact opposite. By selling an additional $267 billion in short-dated bonds to buy long-term ones, the Fed is trying to take Treasuries with longer maturities out of the market, to lower yields and entice investors to take on more risk.

As financial conditions tighten, Fed may have to run to stay in place

June 8, 2012

Seemingly lost in the talk about whether or not the Federal Reserve should ease again is the idea that financial conditions have tightened and the U.S. central bank may have to offer additional stimulus if only to offset that tightening. Writes Goldman Sachs economist Jan Hatzius:

Uncomfortably political

September 23, 2011

Four leading Republicans wrote to Federal Reserve Chairman Ben Bernanke before the Fed’s Sept. 20-21 policy meeting recommending the Fed stop taking steps to boost growth. Fed interventions to pull down the high unemployment rate may do more harm than good and risk inflation, the officials said.

Fed dips back into housing finance

September 23, 2011

While financial markets are primarily focused on “Operation Twist,” the Fed’s return to buying mortgage-backed securities has helped that market. MBS have outperformed Treasuries and interest rate swaps since the FOMC announcement.

The Fed goes long

September 16, 2011

As the U.S. economic recovery stumbles, most observers Federal Reserve policy expect the central bank next week to announce an initiative to replace shorter-term securities on its balance sheet with longer-term ones in a bid to drive longer-term interest rates lower.

Doing the Twist, and other Fed tools

September 16, 2011

For markets, it’s a fait accompli: the Federal Reserve, which meets on Tuesday and Wednesday, is expected to push for some variation on a 1961 policy, known as Operation Twist because it aims to push down long-term borrowing costs while nudging short-term rates higher. Primary dealer banks polled by Reuters two weeks ago, just after the Labor Department reported the U.S. job market had stagnated in August, saw an 80 percent chance that some of sort of twist-like measure would be put into place.