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Bloomberg: Treasuries rallied because the Fed bought a truckload

January 28, 2011

Check out this article from Bloomberg that says Treasuries rallied because the Fed bought billions of Treasuries. The Bloomberg reporter didn’t think of this idea – he just wrote down what his buddies on trading desks told him.*

That’s exactly what I said would happen. I thought this would be common knowledge by now, but people still seem to be surprised when it happens.  The fed just confirmed that they will go through with the entire QE II no matter what happens – and people were shocked by that too.

This shows that the idea of the Fed buying a ton of Treasuries over 6 months is beginning to get traction on trading desks.  This has the potential to be a big, big move.

From this handy chart from the Fed, we can see that next week, there will be a few more days of large purchases. And then they will release information and dates for even more purchases on Feb 1oth.

I like the idea that people are getting out of Notes and Bonds because they have someone to sell them to, and that this pushes people into risky assets so might defeat the purpose of the QE entirely.

But who cares? The Fed is just buying and buying Treasuries left and right.  Why fight the Fed?

*(Every Bloomberg employee I’ve met is sharp and works their ass off. This isn’t a slam on the reporter – he was reporting what the people on the trading desk told him as is his job.)

  1. Peter D
    January 29, 2011 at 12:17 am

    So, what’s going on? The market failing to price in the public information of QEII? Or not trusting it? Weird…
    And combine it with today’s stock market drop.

    • TC
      February 2, 2011 at 5:14 pm

      I think Egypt has put a bid under gold for a risk play, oil because of supply disruption concerns, and sold treasuries because of the fears about the Fed pushing even more liquidity out the door if Egypt blows up.

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