Fed decides on $400 billion bond swap - The Fed - MarketWatch

110922(Wed): Fed fearful of a “slow” economy, decided to start a program to twist the yield curve by swapping shorter-maturity government securities for longer-dated ones.


In a statement, the Fed said it will buy $400 billion of Treasury securities in the 6- to 30-year range and sell an equal amount of maturities of 3 years or less. The purchases would be completed by the end of June 2012.

 The Fed said it acted in light of a worsening global outlook. There were three dissents from the move.



Jonathan Basile, director of economics at Credit Suisse, said the market was disappointed the Fed did not undertake an outright purchase of securities, or QE3. “The Fed moved their chips around but didn’t put any new money on the table,”

. Even if the economy manages to avoid a new downturn, the outlook is for tepid growth not strong enough to bring down high unemployment.

 Fed said growth remains slow with the latest data pointing to continued weakness in the labor market.
The Fed said that inflation has moderated and they expect it to settle below its implicit target of around 2%.



In August, the Fed surprised markets to stay near-zero until mid-2013.


Fed decides on $400 billion bond swap - The Fed - MarketWatch