Saturday, January 15, 2011
The stated purpose of quantitative easing was to drive down interest rates on U.S. treasury bonds.
But as U.S. News and World Reported noted last month:
By now, you’ve probably heard that the Fed is purchasing $600 billion in treasuries in hopes that it will push interest rates even lower, spur lending, and help jump-start the economy. Two years ago, the Fed set the federal funds rate (the interest rate at which banks lend to each other) to virtually zero, and this second round of quantitative easing–commonly referred to as QE2–is one of the few tools it has left to help boost economic growth. In spite of all this, a funny thing has happened. Treasury yields have actually risen since the Fed’s announcement.The following charts from Doug Short update this trend: