A Coiled Spring Being Held Down…Careful !

The Federal Reserve meeting press release, (see link below) gives us a bit of concern from an artificial market force. 


Here is the meat of the release in case you are having trouble with the link

“As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve is in the process of buying $300 billion of Treasury securities. To promote a smooth transition in markets as these purchases of Treasury securities are completed, the Committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October.”

Yes, here we are again, worrying about Interest rates, but please be aware there are unintended effects when we have government intervention (we do agree with the current government policy.)  Like a coiled spring, or rattlesnake, interest rates may be held down currently via artificial, non-market forces.

We are investing accordingly, and warn that great risk may be in long dated Fixed Income Instruments!


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