Oh my. What is the world coming to?
The bond market seems to have gone “off script” and is defying the Fed’s recent announcement of $600 billion in new Treasury purchases.
This would be a rather stunning rebuke of the Fed’s supposed omnipotence and leadership. If it gets out of hand, it could be a real game-changer.
Yes, we had the international community condemn QEII as little more than banana-republic-style money printing, but for the domestic bond market to join into the fray seems rather ominous:
Bucking the Federal Reserve’s efforts to push interest rates lower, investors are selling off U.S. government debt, driving rates in many cases to their highest levels in more than three months.
The Fed’s $600 billion program to buy Treasury bonds began late last week and is kicking into high gear this week, with the central bank buying up tens of billions of dollars of debt.
That should have driven prices up on those bonds and lowered their interest rates, or yields, which move opposite to the price. Instead, yields on almost every Treasury have been rising.
Still, it is far too early to declare that the Fed’s plan is failing, and many rates remain near historic lows.
“The recent run-up in bond yields is worrying to many,” said Dan Greenhaus, chief economic strategist at Miller Tabak, a New York trading firm, but “you need to keep it in context of what happened before the Fed moved.”
We noted this strange behavior in bonds on Friday in the Insider and have been keeping a close eye on the developments since.
by jager06 
