Bonds yields and money printing

[eureka]

Hei,

A question from a newbie:

Is it possible for FED to keep the bond yields low by printing money and buying them at artificially low rates? I heard that the latest auctions have not gone well, so this can compensate for lack of public enthusiasm for government bonds. Apparantly this can help the government with the badly needed money, but what are the possible disadvantages of such policy? Thanks

 

[editec]

If the government prints fiat dollars the average yield of bonds is going to go up, not down.

After all, bonds buyers are looking for investments with yields that are greater than what they believe inflation is going to be.

If the bond's stated return is less than what the market thinks inflation is going to be, their price will discounted until enough people think their return on investment exceeds the purchasers' assumed future rate of inflation.

 

[Annie]

Hei,

A question from a newbie:

Is it possible for FED to keep the bond yields low by printing money and buying them at artificially low rates? I heard that the latest auctions have not gone well, so this can compensate for lack of public enthusiasm for government bonds. Apparantly this can help the government with the badly needed money, but what are the possible disadvantages of such policy? Thanks

It doesn't seem to be working:

http://www.usmessageboard.com/econo...eception-in-economic-reports.html#post1262283

 

[wimpy77]

basically bernanke last week said that they will keep doing what they said they were going to do in march and that's it. bond holders would like the fed to expand their bond purchasing but doesn't look like that is going to happen

 

[Toro]

Hei,

A question from a newbie:

Is it possible for FED to keep the bond yields low by printing money and buying them at artificially low rates? I heard that the latest auctions have not gone well, so this can compensate for lack of public enthusiasm for government bonds. Apparantly this can help the government with the badly needed money, but what are the possible disadvantages of such policy? Thanks

Yes it can but it is not working at the moment as interest rates are at an 8-month high.