Treasury prices mixed after Fed extends stimulus

QUANTITATIVE easing suffers its fair share of controversy, but not over this aspect: whether you like it or not, it’s the central bank’s job and no one else’s. I’ve just read a paper that suggests otherwise: done right, the Treasury could achieve the same thing through debt-management policy. Better yet, the Treasury and Fed working together should be able to multiply the impact of QE.

I make a point of showing the discount rate changes by the Fed don’t translate to mortgage rate changes. I do so because many people think the discount rate does directly effect mortgage rates. But the Fed announced today, actions that actually do impact mortgage rates. Federal Reserve to Buy $1.2T in Bonds, Mortgage-Backed Securities

By Difu Wu:Many investors have been lured into bonds lately, impressed by their strong performance over the past 30 years, as bond prices rose with the dramatic fall of interest rates from double digits to multi-decade lows today (see Chart 1). In 2011, the Barclays U.S. Aggregate Bond Index returned 7.84 percent, 30-year Treasury bonds returned 35 percent, while the S&P 500 was basically flat for the year. Chart 1. 30 Years US Treasury Bond Yield.

By Robert Kessler: US interest rates are likely to rise over the next year and that should limit performance of high credit quality bonds as well as municipal bonds. With the European debt crisis coming back to haunt us occasionally and the Federal Reserve still committed to their bond buy back program until the end of June, Treasury yields may be stuck in a range over the short run.

An auction of 30-year Treasury bonds exceeded already-lofty expectations, with the long bond yielding 4.238 percent.Latest Bond Prices and Yi