I wasn’t sure of the value of QE3 when it was introduced in September of 2012. In retrospect, the low-water mark for the yield on the ten-year treasury occurred in July, 2012, at 1.404%. Rates were already low and did not go any lower even as QE3 was introduced. Besides providing a slight overbid to the treasury and agency MBS markets, maybe it bolstered confidence. Without QE the “Fear Trade” (risk off) would have probably put a lid on rates. Remember, many in the market were screaming for more “QE” thanks to a ‘basket case’ Eurozone, China faltering and a bad jobs report (see Session 53).
Now, the market is obsessed with withdrawal of Quantitative Easing. The Fed’s July Open Market Committee minutes did nothing to ease the uncertainty. In my world, this cloud has a silver lining. Maybe this gives us a much needed correction after the S&P’s fairly uninterrupted 26% jump since the November 2012, post-election low.
So, Fed please, as the NIKE slogan of old implores us: ”Just Do It!” The only people who will miss it will be the media.
What do you think?
PS. As I ready this post for publication, the folks in the financial media are in a major snit over a trading glitch and subsequent interruption in NASDAQ trading. They are foaming at the mouth about how this event continues to destroy confidence in the market….Ridiculous! Meanwhile, the Dow is up over 60 points with the ten-year trading at a 2.92% yield (up another 5 basis points in yield from yesterday’s close) and not one peep from these guys about the “dreaded taper.” Please remember this when the short-attention-span crew gets back to obsession Number One–The Taper.
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