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Sunday, May 10, 2009

Conundrum in bond yields

The Fed is in a uncharted territory trying to buy long-term bonds with objectives to lower inflation expectations and government financing cost. Can it succeed?  Or are we going to see an inevitable rise of government bond yields (steepen yield curve)? And mortgage rates will also have to go up again suffocating the slight chance of housing market recovery?

Read the analysis from Wall Street Journal.