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Fed Buys $5 Billion in Agency Debt
Calculated Risk — From Bloomberg: Fed Buys $5 Billion of Fannie, Freddie, FHLB Debt The Federal Reserve bought $5 billion of Fannie Mae, Freddie Mac and Federal Home Loan Bank corporate debt under a new program aimed at reducing mortgage costs. The central bank acquired bonds with maturities between December 2009 and November 2010, according to the New York Fed’s Web site. Dealers offered $12.9 billion of the securities. The purchases under the $100 billion program are the Fed’s first buying of long-term “agency” debt in 28 years.This is exactly the road map Bernanke discussed in 2002: Deflation: Making Sure "It" Doesn't ...

The Liquidity Monopoly
The Aleph Blog — I’ve been racking my brain to think about the bond market, and all that it implies.  I think Treasury securities are a bubble, but that’s a very different sort of bubble than we are accustomed to.  Most bubbles involve risky assets, and are driven by greed.  This bubble involves “safe” assets, and is driven by fear. During fear, market players seek liquidity.  Liquidity means many things, but in this case it means the ability to reverse direction at low cost, and fast.  Nothing feels truly safe, aside from the most trusted entities in the market, maybe.  Governments, with their taxation authority, assume leading roles, and ...