Tuesday, October 26, 2010

Fed's Beige Book indicates upcoming bond industry push

The Federal Reserve publishes the Beige Book eight times a year to offer an assessment of the state of the economy in different regions around the United States. Info within the Beige Book is collected from all the Federal Reserve financial institution districts. Bad news is nevertheless prevalent within the latest Beige Book that came out Thurs, nevertheless the economic climate has halted a downward trend that started earlier this year.

Fed guesses come from the Beige Book

A Fed governors meeting will occur on Nov 2-3, which the Beige Book came out before. The Fed meeting will likely be reviewing the economic climate. Methods to stimulate the economy will be reviewed too. Beige Book data shows, accounts the Washington Post, that a stimulus is needed. The Oct Beige Book talks all regarding the reasons why pumping cash into the economy and purchasing huge bonds as Fed governors are hinting at would be the best idea. It talks concerning the weak job sector, poor economic growth and threat of deflation in order to do this.

The great Beige Book news

The Beige Book from the Fed’s shows all the bad things going on. Gail Marks Jarvis at the Chicago Tribune accounts on the good parts of the report. She points out that last spring, the Beige Book reported on “widespread signs of deceleration” in the economic climate. There were improvements shown in the October Beige Book information. Bright spots highlighted by Jarvis include a continued expansion of manufacturing, new factory orders for a lot of industries and a slight boost in consumer spending.

There can be changed in the bond industry due to the Beige Book

Seven of the 12 Fed regions showed an improvement economically based on the Fed’s Beige Book. The rest are either inconclusive or downright moribund. According to ABC News, investors interpret the Beige Book in their own way. They see it as a sign that the stock market will start to have the Fed in it soon. A higher Treasury yield is what traders have been trying to get by getting bonds because of this. After the November meeting, the Fed is expected to start getting more Treasury’s which would make bond yields go down a bit. The Fed is betting that buying Treasury’s will push long-term rates of interest lower to stimulate spending and investment.

Articles cited

Washington Post


Chicago Tribune


ABC News


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