FOMC Turning The Presses Back On??
?? Fundamentals
Bond futures are up ahead of the FOMC announcement regarding its interest rate policy. While there is no expectation of any change to interest rates, it is widely believed the Fed will increase their Bond buyback program. In essence, the Fed is turning on the printing presses once again by increasing money supply.
The central bank seems dead set on giving the Federal Government a blank check to spend freely and, at the same time, making treasuries unattractive to investors. This forces many investors into riskier assets, like stocks and commodities.The Fed essentially strong-arming investors into stocks can be seen as a major reason equity prices are as inflated as they currently are at the moment.
In addition to expectations of increases to the Bond buyback program, Treasuries have gotten a boost from safe haven buying due to the government’s inability to reach any sort of agreement. The pigheadedness of both parties has left them far apart on the Fiscal Cliff talks.
?? Technical Notes
Turning to the chart, we see the March Bond contract pulling back after failing to test recent highs above the 151 level. This suggests Bonds may be mired in more range-bound trading. Prices have been tracking the 20-day moving average closely in recent sessions. If prices break through minor support near the 148-16 level, prices likely could attack the 146 level on the downside.
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