2013-09-15

My Taper Prediction

Based on the falling annual federal deficit, I'm going to go with a prediction I've not seen anywhere else. The Fed will reduce Treasury purchases by $15 billion, but increase MBS by $5 billion for a net $10 billion reduction.

I just did a search to see if anyone else made that prediction, and while I didn't find one (I didn't do a deep search), I did come across this: Study Suggests Shift in Fed Bond-Buying
A new study finds that the Federal Reserve should keep buying mortgage-backed securities even as it stops buying Treasury securities, and even as it sells off its existing holding of Treasuries and mortgage bonds.
That study is here: The Ins and Outs of LSAPs. LSAPs being Large Scale Asset Purchases, i.e. QE. The NYTimes piece notes the paper states:
But they found little economic benefit in holding mortgage bonds or Treasuries, a basic element of the Fed’s stimulus campaign.

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