Treasury yields were broadly unchanged yesterday with the 10-year yield rising just 1 bps from 1.95% to 1.96%. Expect more of the same today as the markets await direction from the Fed tomorrow.
Treasury officially hit its debt ceiling on Sunday, and there is no apparent plan for a debt ceiling increase at this time. After Congress suspended the debt ceiling, the hope was that Washington would find a way to lift the ceiling prior to this event. However, they have not. Treasury is expected to take extraordinary, and creative, steps to avoid the ceiling being an issue. It is expected that they may be able to avert having to have Congressional action into October or November.
A report published by the conservative AEI today says the Fed cannot juice the markets indefinitely. “The hope will be that the Fed will get lucky on its fourth try. But with Europe in recession, China slowing, and tighter fiscal policy, there is little reason to believe that having the Fed buy another $1 trillion-plus of bonds from banks will increase growth or reduce unemployment further. Whether or not a new round of QE boosts stocks again remains to be seen. I wouldn't bet on it.”
(The Market Today ONLINE)
The continuation of the 'tigger bounce' of the new normal of uncharted territory......
and what will happen when the Fed stops buying???
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