The Fed buying Corporate and Mortgage Bonds?

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March2009
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The Fed buying Corporate and Mortgage Bonds?

Post by March2009 » Thu Mar 26, 2020 1:08 pm

I would expect the market to set bond yields based on inflation expectations and risks. However with the Fed purchasing treasuries and now corporate and mortgage backed bonds; the yields (set by the market) are being suppressed. Asset allocation investing works when the market sets prices. How does the fed move affect our strategy?

Note: My understanding is this is the first time the Fed has purchased corporate bonds, mortgage bonds, small business debt, student debt, and consumer debt.
In bear markets, stocks return to their rightful owners. - J.P. Morgan

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firebirdparts
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Re: The Fed buying Corporate and Mortgage Bonds?

Post by firebirdparts » Thu Mar 26, 2020 1:19 pm

The government (treasury) took Fanny and Freddie into receivership in 2008, and under Federal direction, the Federal Reserve Bank bought a very large volume of their mortgage backed securities. So they not only bought mortgages before, Treasury bought the horse they rode in on.

This is a good example of something done competently and efficiently and successfully by capable people. Nowadays, we live in a culture where you're not supposed to believe anybody competent did anything well.
A fool and your money are soon partners

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Phineas J. Whoopee
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Re: The Fed buying Corporate and Mortgage Bonds?

Post by Phineas J. Whoopee » Thu Mar 26, 2020 7:54 pm

OP: Your understanding is incorrect.
PJW

Topic Author
March2009
Posts: 29
Joined: Sat Mar 21, 2020 7:04 pm

Re: The Fed buying Corporate and Mortgage Bonds?

Post by March2009 » Thu Mar 26, 2020 8:39 pm

https://www.cnbc.com/2020/03/23/fed-sur ... demic.html

Thanks for the information. It was helpful. I'm just wanting thoughts on the Fed's impact.

Does anyone think the Fed buying Corporate Bonds affects an asset allocation investment strategy since the bond prices are now higher than if the free market had set the prices?
In bear markets, stocks return to their rightful owners. - J.P. Morgan

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