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QE2 in Round Trillions

The UK Telegraph turns the spotlight on the Fed……

Here is a back-of-an-envelope guess by David Greenlaw at Morgan Stanley on what the Fed can expect from a second blitz of bond purchases, or `Shock & Awe’ as he calls it.

If Ben Bernanke does a further $2 trillion (on top of the $1.7 trillion already in the bag) the yield on 10-year US Treasuries will drop 50 basis points to around 2.2pc.

GDP growth will be 0.3pc higher than otherwise in 2011 and 0.4pc higher in 2012.

The unemployment rate will be 0.3pc lower in 2011 and 0.5pc lower in 2012 — (in other words drop from 9.6pc to 9.1pc, ceteris paribus).

More http://blogs.telegra…ound-trillions/

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