here's the process, Fed prints $75 billion out of blue smoke (mouse click) Fed. buys $75 billion in Tresuries in the open market (mouse click) Fed swaps $75 billion in Tresuries for $5 worth of CMOs (mouse click) Dollar holders and US tax payers get F'd over (not a mouse click)
Quote from article: "The banks insist they are well capitalised, with enough liquidity to tide them through..." I'd like to run that quote past Cramer. New prop on his show "Hide the register" He could "hide the register" in Al Capones vault. This would make good tv. ------------------------------------------ Update: The Mystery of Al Capone's Vault was a one-time live American television special broadcast in syndication in April 1986 hosted by Geraldo Rivera. The program was centered around the opening of a secret vault once owned by noted gangster Al Capone. The program is now perhaps best-known for the vault being ultimately empty except for debris.
CNBC got some hamster to go on after the TAF auction and spin it as good news since it was subscribed at only 75 bill. give or take "the good news is that it wasn't 180 bill" gee thanks
Perhaps paper is pricing in a recovering economy and knows the fed will raise them back up once it gets moving and they don't want to be stuck in long term loans that are only paying what the future rate will be once the rates are hiked back up or maybe even less. In 2004 the target rate got down to 1 or 1.25 if you recall yet 30 year mortgages never fell under 5.
That's why Feds cut rates so you take that cash horde and start investing wisely in different asset classes like real estate and stocks. If you have not seen this before you are too young perhaps. This is an age old practice used by Feds to stimulate economy nothing new being going on for the last 80 years in this country.
Its NOT free money its borrowed at Fed fund rates. Just like anybody else you pay for it. Its a great tool to facilitate liquidity like a great big pawn shop.
Rates on adjustable mortgages, credit cards, lines of credit, checking and savings accounts CDs all have come down. Fixed mortgage rates have nothing to do with Feds rate cuts they are governed by Ten year Treasury yields (symbol TNX).