Treasuries posted gains yesterday despite positive economic data that tried its best to overcome weakness in stock overseas. The two year finished the day at .97%, its lowest yield since mid-July, thanks to New York Fed President William Dudley’s comments the quelled speculation from last week that the Fed was nearing the beginning of its formal exit strategy.
Last week two separate Fed presidents, Richmond’s Lacker and Saint Louis’s Bullard, spoke out on the possibility the Fed may not have to purchase the entire $1.25 trillion in MBS. Dudley definitely leans more toward the majority within the FOMC than Lacker (the only FOMC member who has voted against expanding the monetary base through targeted credit programs), and didn’t seem as confident that things are improving enough to warrant such an aggressive action. MBS didn’t seem to take last week’s comments too seriously, so there wasn’t any real correction to be made on Lacker’s counter argument for the continuation of the program. But still, it was a smart move to come out and say something.
Cliff J. Reynolds Jr., Investment Analyst
Last week two separate Fed presidents, Richmond’s Lacker and Saint Louis’s Bullard, spoke out on the possibility the Fed may not have to purchase the entire $1.25 trillion in MBS. Dudley definitely leans more toward the majority within the FOMC than Lacker (the only FOMC member who has voted against expanding the monetary base through targeted credit programs), and didn’t seem as confident that things are improving enough to warrant such an aggressive action. MBS didn’t seem to take last week’s comments too seriously, so there wasn’t any real correction to be made on Lacker’s counter argument for the continuation of the program. But still, it was a smart move to come out and say something.
Cliff J. Reynolds Jr., Investment Analyst
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