Fed Allows Rates To Rise as Treasury Supply Balloons – WSE Pro

UPDATE – The Fed did a small drain in Thursday’s Open Market Operations in spite of the Treasury settling a significant increase in the supply of new paper. The results were seen in the T-bill market with rates on 13 week bills surging past 1.90, and the 17 day CMB auction going off above the 2% “barrier” at 2.15. The Fed still shows no sign of stepping up to monetize the Treasury supply, as it continues to hold the size of its asset base in check. This is consistent with yesterday’s remarks by Dallas Fedhead Fisher, who vowed that the Fed will never do this. We’ll see about that. The pressure is only going to build from here as Treasury supply mushrooms, FCBs and other indirect bidders back away from the market, and interest rates skyrocket.

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This entry was posted on May 29, 2008 at 1:55 pm and is filed under Money and The Fed, Professional Edition. You can follow any responses to this entry through the RSS 2.0 feed.