Three Words From the Fed Add Fuel to Treasuries Long-Bond Rally
- Fed will reinvest until rate increases are `well under way'
- Gap between two-, 30-year yields reaches slimmest since April
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Three short words from the Federal Reserve gave Treasury-bond bulls another reason to cheer this week.
The central bank’s statement explaining its decision to lift interest rates from near zero also included a plan to keep reinvesting proceeds from its $4.5 trillion debt stockpile until the normalization of borrowing costs is "well under way." Rather than shrinking its balance sheet by collecting principal from maturing debt, the Fed has used the payouts to maintain holdings it amassed as part of stimulus efforts.