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Fed Keeps Pumping Cash To Primary Dealers, But Other Liquidity Flows Weaken

The Fed maintained the status quo in its decision last week, which means that it will continue to pump $25 billion per month through the trading accounts of the Primary Dealers via its MBS purchase program. That number could increase modestly later this summer as a result of the latest mortgage refi mini boom driven by record low mortgage rates. However, even an increase to $35 or $40 billion per month may not be enough to boost the markets because other liquidity inputs are weakening. If that does not change in the weeks ahead the best stocks and bonds are likely to do is to remain flat.

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