Can the FED control long-term rates ?

[JoeSixpack]

Always wonder where to post.. might better fit the Econ thread or the "Time to short Treasuries" ? Feel free to move.. thanks

"[...]One relatively straightforward extension of current procedures would be to try to stimulate spending by lowering rates further out along the Treasury term structure--that is, rates on government bonds of longer maturities [...] A more direct method, which I personally prefer, would be for the Fed to begin announcing explicit ceilings for yields on longer-maturity Treasury debt [...] say three to six years.", Bernanke

I expect inflation expectations and the need to borrow, while at the same time demand decreases for TNotes/Bonds, is a driver for rising rates out on the curve not far in the future. While good for the banks, this is surely what the economy needs most...

What can the FED do.. if they want to kickstart spending with lower long rates (also mortgages) and try to manipulate the curve... lower yielding USD causes further ccy drop -> rising import prices ?... more importantly, how could they finance this without printing money... even more inflationary and more pressure on inflation premiums -> exploding yields on 30y ?

Catch 22 ?

[phirang]

watch the G12 meeting: gulf states, EU, and japan will help out.

i've learned from the last intervention to go long USD and US mkt indices on these interventions!

[GRG55]

watch the G12 meeting: gulf states, EU, and japan will help out.

i've learned from the last intervention to go long USD and US mkt indices on these interventions!

There's anecdotal evidence already of coordinated intervention to prevent a US $ crisis, so your observation certainly appears valid.

On the subject of long Treasury yields, the Fed is in a Catch 22. The yield curve has flattened recently, and that creates a problem for the Fed's bank resuscitation efforts. My guess [strictly a guess] is that the Fed will encourage and tolerate higher long T-bond yields for an extended period of time in order to support risk-free bank profits to rebuild their cratered up balance sheets.