The Fed's $600 billion program to buy Treasury bonds began late last week and is kicking into high gear this week, with the central bank buying up tens of billions of dollars of debt.
Bucking the Fed's efforts to push down interest rates, investors are selling off U.S. Treasurys, driving some rates to their highest levels in months. Michael Casey and Emma Moody discuss. Also, Jon Hilsenrath talks about Fed officials, including Janet Yellen and Bill Dudley, who say the stimulus plan is an attempt to boost U.S. growth, not weaken the dollar or raise inflation above 2%.
That should have driven prices up on those bonds and lowered their interest rates, or yields, which move opposite to the price. Instead, yields on almost every Treasury have been rising.
The trend is a potential problem for the economy and the Fed. Rates had fallen sharply for months in anticipation of a Fed buying program, and in a short time much of that effect has been lost, spelling an unwelcome rise in borrowing costs throughout the economy.
That could throw a wrench in what the Fed is trying to accomplish: to use low rates to encourage more borrowing and risk-taking by consumers, businesses and investors, thereby reviving growth.
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