Note to Self: The Fed Likes Bonds It Thinks Are Cheap

- Quantitative Easing 2010: The Fed Still Likes Cheap Bonds "Inside, we analyze which issues the Fed bought during the Treasury purchases of 2009 and compare them with what it bought this week using our spline model. The results: Last year it bought bonds that were cheap to spline, and this year it is doing the same."
- Ahead of the Curve: US vs. Japan "While we do expect the curve to flatten in the medium term, we do not think the Treasury market will move in lock-step with what the Japanese rates market experienced in the 1990s. Swift policy actions, strong productivity, and constructive demographics give us less reason to believe deflation and negative growth may lead to a Japan-style curve compression."
- Munis "Based on the experience of the early 1980s, local government employment could be vulnerable to significant additional employment reductions if predictions of a double-dip recession come true."

RBC US Fixed Income Weekly 20100819

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