Fed Seen Buying Few Hundred Billion Dollars Worth of Treasurys: Report

Discussion in 'Wall St. News' started by S2007S, Oct 26, 2010.

  1. S2007S


    Fed Seen Buying Few Hundred Billion Dollars Worth of Treasurys: Report
    Reuters | October 26, 2010 | 11:14 PM EDT

    The U.S. Federal Reserve is likely next week to unveil a program of U.S. Treasury bond purchases worth a few hundred billion dollars over several months, the Wall Street Journal reported on Wednesday.

    What the Journal report called a "measured approach" compares with investors' base-case scenario of an initial commitment to buy at least $500 billion in Treasury debt over five months, in an effort to spur lending and to support an economic recovery that is too weak to tame high unemployment. For a meeting preview see

    The Journal gave no source for the report on its website and said that, although details remain to be sorted out internally, the broad outlines have taken shape.

    Fed officials meet on Nov. 2-3 and are widely expected to embark on a second round of monetary easing, but much uncertainty surrounds the scope and pace of possible bond purchases.

    The Journal said Fed officials wanted to avoid the "shock and awe" style used during the global financial crisis in favor of an approach that allowed them to adjust their policy, and possibly add to their purchases, over time as the recovery unfolded.

    It said the Fed could leave open the possibility of more purchases in the future, particularly if inflation is projected to remain below 2 percent and the unemployment outlook remains high, or it could halt the program if the economy or inflation took off surprisingly.

    The bond-buying program is likely to focus on Treasury bonds with maturities mostly between two years and 10 years, it said.

    The Fed could buy even longer-term bonds, although some officials are reluctant to do that aggressively because it could expose them to long-term losses without much added benefit, it said.