Is the Fed Propping Up Housing?

Peter Coy

Societe Generale, the big French investment house, came out with a report today arguing that the Federal Reserve wants to--needs to--prop up the U.S. housing market. The firm e-mailed copies to clients and some journalists. (Sorry, I can't provide a link to it.) Here are some key sentences:

"About a third of total U.S. job creation over the last year can be attributed to the pickup in [housing] construction and borrowing. ... Borrowing ... [has] a symbiotic relationship with U.S. bond yields. ...

The Federal Reserve cannot afford to frighten the bond market ...

So, a sharp rise in bond yields is unlikely over the coming years: home demand is likely to grow strongly, and U.S. house prices most likely will continue to rise rapidly."

Although the piece isn't signed, it seems to be coming out of SG's London office. Not saying I agree with the analysis, but it's more grist for the mill.

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