Whether to Reduce the Scale of 600 Billion U.S. Dollars to Buy Bonds

10-year U.S. Treasury yields hit a high of 6 months to 3.33%, will be the second most important issue to discuss interest rates. Bond yields and inflation expectations rose that the U.S. economy is accelerating, making it narrow the scale of 600 billion U.S. dollars to buy bonds, becoming the biggest problem the U.S. economy.

Some analysts believe that unless the U.S. economy in 6000 billion stimulus resurgence, or the Fed will not be before next June to change the existing policy, whether to expand the size of the share debt the Fed is waiting for U.S. fiscal 2011 budget bill finalized.

But that is not so simple. Obama 6000 billion stimulus plan, the original is to lower interest rates, but then Obama to the Republican compromise, extend Bush's tax cuts during the increase in unemployment benefits and measures, the media image of this effect will be known as: The Fed's efforts have been offset by Obama's actions.

Obama's compromise plan to the Fed's stimulus poured cold water. Investors predict that, from this perspective, Bernanke is likely to continue to expand the stimulus scale. In addition, Bernanke told the CBS "60 Minutes" interview program that will certainly expand the size of the share debt, currency strategist at Royal Bank of Scotland Skye Masters said, no matter how the outside world conflict QE2 (the second round of quantitative easing) program, in this interest-rate meeting, Bernanke will certainly continue to support its current monetary policy.

But to continue to expand the scale of QE2, the Fed's political pressure will be greater. Assembly Republicans believe that quantitative easing will lead to hyperinflation, asked Bernanke to tighten monetary policy as soon as possible. Obama plans to extend tax cuts for two years, equivalent to 200 billion U.S. dollars into the economy the stimulus funds, which are conducive to pushing up bond yields. We worry about the fiscal deficit of the U.S. House of Representatives Speaker Boehner, said in January 2011 once the real power control of the House of Representatives, the deficit reduction policies immediately as a primary issue. Deficit reduction bill first proposed 5% reduction in the congressional budget, which will save taxpayers 25 million to 30 million U.S. dollars range, as the Republican efforts to curb runaway federal spending part of the plan. These programs are beneficial to long-term economic growth, once the unemployment rate, improved business confidence and trade data, the Fed will tighten policy to implement a timely manner.

Expert analysis, although the difference is large, but the Fed is still the best strategy is to choose anything, but next year if there is a third round of stimulus would be difficult to conclusion. While bond yields hit a new record, but outlook uncertain global economic recovery, European and Asian debt crisis has not yet come to the end of high inflation, U.S. economic data is good and bad, the real estate market has not stabilized, the U.S. bond yields and Inflation is also expected to instability. Last week, investors in large-scale sell U.S. treasury bonds, the bond market was out of control, many people believe that there is high rate of return is not sustainable. Many investors believe the Fed might announce to continue to expand loose scale, the scale may be expected to expand from 400 to 1000 billion U.S. dollars.

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