An Unjustified Bond Selloff
On Wednesday the Federal Reserve is scheduled to hold its first policy meeting since the momentous September announcement of its third round of quantitative easing. Most analysts agree it is unlikely the Fed will announce any new policies after this meeting. Still, there is a lot on the Fed's plate: better economic data in September, the end of Operation Twist, the fiscal cliff and the upcoming end of Ben Bernanke's term. All four of these have been moving the bond market in recent days, often in a manner that I don't think is justified by the fundamentals.
First, I do not think the Fed will slow down its purchases of mortgage-backed securities based on the mild data improvement during September. In part this is because I'm skeptical the data are accurately reflecting a significant acceleration in activity....612 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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