Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news the US Federal Reserve announced this morning it would 'twist' its portfolio of bonds to sell short term bonds and buy US$400 billion longer term bonds in an effort to lower long term interest rates.
However, the US Federal Reserve also warned of a deteriorating economic outlook and stopped short of any sort of third round of quantitative easing QE III or money printing.
See the full US Federal Reserve statement here on the 'Twist' strategy and the economic outlook.
This is the key quote on the economy: "There are significant downside risks to the economic outlook, including strains in global financial markets." See more analysis here from Reuters on the Fed's announcement.
Here's its full Fed release on the plan to sell short term bonds and buy long term bonds. It will also reinvest money from maturing mortgage bonds into more mortgage bonds, effectively leaving money printed in 2009 out in the market. See more on the announcement here at Bloomberg.
The problem for the US economy is that 30 year mortgage rates are already at record lows of 4% yet households are reluctant to borrow and spending, either because they are already heavily in debt and/or unemployed, or they worry about still-falling house prices.
There were three dissenters in the US Federal Reserve's Open Markets Committee, the same as at the last meeting. This underlined just how divided America's policy elite is on the way forward to stimulate the world's largest economy. It also reminded investors how apparently ineffective the first two rounds of quantitative easing have been.
US Treasury bonds rallied sharply, which pushed 10 year bond yields to record lows of 1.85% and pushed the 30 year Treasury bond yield down to just under 3%. See more here on the Treasuries rally at Bloomberg.
The Dow fell 3% in the last hour of trade to close down 283 points, having been slightly in the black earlier in the day. See more here at Bloomberg.
The New Zealand dollar slumped more than 1.5 USc in frantic morning trade to briefly dip below 80 USc around 8 am. It fell to an intraday low of 79.93 USc and was a tad above 80 USc around 8.15 am.
It was last under 80 USc on May 26.
The New Zealand dollar tends to move dramatically in tune with the Dow as it is seen as currency most exposed to movements in the global economic outlook and commodity prices.
Elsewhere, the Bank of England signaled it was likely to expand its current programme of 200 billion pounds of quantitative easing in its own version of QE II. This is despite inflation running at over 4%. See more here at Reuters.
(Updated with links, details, chart below)
No chart with that title exists.
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More like.."Dow slumps on Fed's economic farce"
Meanwhile Gummy and I are buying Greek govt bonds!
"The interest rate on one-year Greek government notes on September 9 was 93%. On September 11, it was 106%. On September 14, it was 117%".
http://www.marketoracle.co.uk/Article30544.html
We ask only that the Greek govt cut to the quick and pay us the 17% on the hundred billion dollars we would have loaned them.
Hey Gummy, what you gunna do with your $17,000,000,000 ?
I hear the Fed has no more weapons in it's arse nal.
Bloomberg on Alan Bollard speaking in New York: “We do have a picture where we still do expect to have to push rates up,” Bollard said. “However we don’t think there is any particular rush to do that.”
http://www.businessweek.com/news/2011-09-21/new-zealand-will-take-time-…
And in pommyland...
"Bank of England's MPC indicates QE2 is a case of if not when
The Bank of England's Monetary Policy Committee (MPC) has sent the message loud and clear that it is now a case of "when" and not "if" for a second round of quantitative easing"
QED...this is a battle between the American UK print and be dammed policy....versus the German euro policy of bugger the banks and the creditors and let the peasants survive in an age of defaults on stupid loans made by idiots to fools who wasted it on unproductive crap.
So if LJhooker keeps up the good work they shopuld lighten up Nz to the tune of 90,000 hectares this year, add in say another 4 real estate agencies doing the same and and its 360,000 hectares a year or for those who still remember what an acre looks like, its a lot, 889,200 acres, think of all the new jobs, we are all going to be rich.
From the link below I quote
>>>>
“Look,” say all these bare-faced lenders, “We lent this money on good faith. Damn it, you begged us to, in order to keep you afloat. Well, we did out duty….where’s our reward?”
It is a wonderful line, but it’s hypocritical bollocks. These lizards keep going until they get to the guarantor of last resort – and then they exact their price. “Can’t pay us in cash? That’s OK…we’ll take it in power instead.”
>>>>
WHY SPAIN WILL SOON BE BACK ON THE RADAR AGAIN
Spain’s cost of raising loans spells out the EU denouement for all to see.
http://hat4uk.wordpress.com/2011/09/21/crash-2-why-spain-will-soon-be-b…
So in a nutshell, all three latin debtors will go down. And thus, the eurozone will go down.
In the light of this glaring inevitability, mates often ask me why the lenders carry on supplying money to pump these dead horses full of formaldehyde, as if they might be whole herds of Damien Hirsts. Surely, they point out, they must know they won’t get paid?
Of course they do. But ownership of debt is power in this world. Not for nothing do banking accountants treat debt as an asset. In truth, it’s more than an asset: it’s a lever.
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