19 Sep 2013
Flash: Fed relies heavily on low yields regarding “tapering” – RBS
FXstreet.com (Athens)- Greg Gibbs, FX Strategist at RBS suggests that “the Fed is more clearly focused on targeting low yields for longer and is prepared to lean on QE as much as guidance to get that outcome.”
Key Quotes:
“Bernanke believes the big rise in US yields is partly related to a position squeeze and not the fundamental consequence of tapering. As such, it is possible that taper does occur before year end, not as a result of a much stronger US economy, but as a result of a more prolonged period of yields that are between the lows in April and highs in Aug/Sep.”
“Needless to say there is a potential catch-22 for the Fed - they will taper only if yields don’t go up too much, but tapering tends to push yields up. So it appears more than ever that the Fed is using QE to target low yields. This is a pretty dovish stance.”
“Bernanke may sense that he can deliver a taper start later in the year without triggering a big rise in yields. With Fed policy guidance on taper as clear as mud, the market will rely heavily on the media Fed-watchers like Hilsenrath for guidance
Key Quotes:
“Bernanke believes the big rise in US yields is partly related to a position squeeze and not the fundamental consequence of tapering. As such, it is possible that taper does occur before year end, not as a result of a much stronger US economy, but as a result of a more prolonged period of yields that are between the lows in April and highs in Aug/Sep.”
“Needless to say there is a potential catch-22 for the Fed - they will taper only if yields don’t go up too much, but tapering tends to push yields up. So it appears more than ever that the Fed is using QE to target low yields. This is a pretty dovish stance.”
“Bernanke may sense that he can deliver a taper start later in the year without triggering a big rise in yields. With Fed policy guidance on taper as clear as mud, the market will rely heavily on the media Fed-watchers like Hilsenrath for guidance