LEX They must be dancing in the streets of Beijing. On Wednesday, the US Federal Reserve decided to follow the Bank of England’s move to start buying longer dated government bonds in order to “improve conditions in private credit markets”. Treasuries, as hoped, rallied – the yield on 10-year bonds fell about 50 basis points. The dollar buckled, while gold and equity markets cheered.
Some caution is required, however. The Fed’s move is modest compared with the sums the UK central bank is throwing at its government bond market. An equivalent amount, about a fifth of total outstanding gilts, would spew out a number above $900bn. The Fed, by contrast, only plans to purchase “up to $300bn” of Treasuries.
