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Getbig Main Boards => Politics and Political Issues Board => Topic started by: Bindare_Dundat on March 19, 2009, 07:54:07 AM
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Federal Reserve program to buy up $300 billion of U.S. debt may turn slump into a near-term trend, experts say.
NEW YORK (CNNMoney.com) -- A U.S. government plan to buy up its own debt continued to plague the dollar Thursday, and experts say the free-fall could last a long time.
The Federal Reserve announced Wednesday that it would purchase $300 billion of long-term Treasurys over the next six months. Called "quantitative easing," the program is designed to lower borrowing costs for consumers and get credit flowing more freely again.
But the decision to buy up massive amounts of government bonds sent Treasury yields lower, as prices move in the opposite direction of interest rates. As yields fall, U.S. assets become less attractive to foreign investors, leading to a decline in the dollar relative to other currencies.
"Usually, one of the things that supports a currency is the nation's benchmark bond yield," said Antonio Sousa, senior currency strategist at Forex Capital Markets. "People no longer want assets in dollars because the yield is so small."