Bloomberg the Company & Products

Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

Dr. Doom Backs Fed Stimulus, Sees 3.5% 30-Year Yield: Tom Keene

Don't Miss Out —
Follow us on:

Aug. 10 (Bloomberg) -- The Federal Reserve should announce today additional purchases of debt to support the economy, according to Henry Kaufman, the former Salomon Inc. vice chairman nicknamed Dr. Doom for his forecasts.

“There is an important decision that has to be made by the Federal Reserve today,” Kaufman said in a radio interview on “Bloomberg Surveillance” with Tom Keene. “That decision is whether to come in and buy government securities, coupon issues, presumably longer-dated issues, in order to offset the maturing mortgage obligations that are coming due over the extended period of time. The Fed should do that.”

The central bank is lagging behind the private sector in recognizing slower economic growth, said Kaufman, 82, president of Henry Kaufman & Co. in New York and a former board member of Lehman Brothers Holdings Inc. The yield on the 30-year bond will drop almost 0.5 percentage point to 3.5 percent, Kaufman said.

A reinstatement of stimulus would ease pressure on homeowners by influencing “the rate that has to be paid on mortgage securities, and therefore a lower mortgage rate will allow many individuals to continue to refinance their existing mortgages and reduce their mortgage debt service burden,” Kaufman said.

Some investors are speculating that the Federal Open Market Committee may consider providing additional stimulus to the world’s biggest economy after data indicated the recovery may be stalling. The Fed has kept the benchmark interest rate virtually at zero since December 2008 and also bought Treasury, housing-agency and mortgage-backed securities in a stimulus strategy known as quantitative easing.

St. Louis Fed President James Bullard wrote in a research paper released July 29 that the central bank should resume purchases of Treasury securities if the economy slows and prices fall rather than maintain a pledge to keep rates near zero.

To contact the reporters on this story: Mary Childs in New York at mchilds5@bloomberg.net; Tom Keene in New York at tkeene@bloomberg.net

To contact the editor responsible for this story: Robert Burgess at bburgess@bloomberg.net

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.