Tuesday, April 12, 2011

Treasury To Stop Buying Government Bonds

In June of this year the U.S. Treasury is scheduled to discontinue the purchase of 100's of billions of dollars of U.S. Treasury bonds. This program began in November 2010 with the objective of holding down long term interest rates.

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With the discontinuance of this program, there is concern that long-term rates could begin to rise and this in turn could result in higher interest rate for commercial real estate. This in turn could cause the recovery to stall in the fragile real estate market.  The graph to the right shows the run-up of commodity prices as compared to the Fed purchases of bonds. This suggest that the market believes that as the Federal Reserve moves out of the market interest rates will rise.

This is worth paying attention too.

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