More contradictory actions from the Fed.
On May 2, reverse repurchases (RRPs) = $5.75 billion followed by outright purchases (permenant additions of cash) = $1.35 billion.
Then on May 3, they added $18.65 billion!
Whatever their reasons, they have reduced the 3-mo./10-yr. inversion in Treasuries and created the first NORMAL commercial paper curve in almost a year!
5 comments:
Hello Deborah,
Two questions:
What do you see for the stock market over the next couple of months? and
Any thoughts on this Thurs being the one year anniversary of the May 10 liquidity drain? (Not really mentioned in the media.)
Best Regards, Jim P.
What is the net effect of these actions on the US dollar vs. Euro? Will this repatriate funds back into US Treasuries from the EU?
they are really crankin' the dollar lower. How low can we go? At some point dollars will be the place to be. Do we think US consumers will adjust to rising gas and food prices? Any feelings on what to look for to take advantage of the inevitable?
Could the fed be positioning the economy so that they can justifiably raise rates to attract enough capital to fill the pending hole that will be left by foreign treasuries who are in the process of balancing their reserves with euros? (Sorry for the run-on.)
Dear Friends,
The Fed often eases money supply during the year before an election. They are probably trying to gradually stimulate the economy. This is good for stocks as well as jobs.
Jim, please fill me in on the May 10, 2006 liquidity drain!
Kumbu, with the UK ten year at 5.09%, the Fed will have to drain a ton of money to make our rates competative.
Anny, not sure what you feel is inevitable. I'm pretty optimistic about the outlook for the economy and markets; this looks like a normal pre-election year scenario. I'm not licensed to dispense investment advice to individuals and don't know you personally, but large stocks doing international business may outperform some other assets.
Great questions! Thanks, Deb
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