Home > Main > The Backdoor Fed bailout in Treasuries

The Backdoor Fed bailout in Treasuries

December 21, 2010

A Huge Stack of Money

Nothin’ is worth anythin’ unless you can sell it.  The Fed purchases of Treasuries allows some people to sell Treasuries at higher prices.

A quick calculation of the money transfered to smart buyers of bonds is $60bn.

Bonds from 5 years on out are about 10% higher than they were last year when the fed announced QEI.  Purchasing these Treasuries allows people who bought Treasuries last year to realize profits.

$600bn *10% = $60bn

While the purchases by the fed removes interest payments to bond holders, and also reduces the yield for bonds purchased today, it also transfers money directly to some savvy bond holders.

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