It may seem counterintuitive but the evidence suggests QE has the opposite effect on US treasury yields to that intended

Guthrie Williamson

Guthrie Williamson

It may seem counterintuitive but the evidence suggests QE has the opposite effect on US treasury yields to that intended. When QE1 ended in May 2010 treasury yields declined and when QE2 commenced in November 2010 treasury yields increased. This is probably due to QE having more influence on broader risk appetite than directly on bond prices given the Fed is not a marginal buyer ie. the Fed has no price sensitivity or price target in their purchases. Whilst treasury yields rose in recent months in anticipation of tapering(ie. beginning of end of QE3, subsequently dashed due to US govt shutdown and debt ceiling issues). I suspect treasury yields will decline when tapering actually occurs.


Guthrie Williamson
Guthrie Williamson
PM
Guthrie Williamson

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