Thursday, March 19, 2009 at 04:02PM | Staff Federal Reserve Bank to Buy U.S. Government Debt To Ease Credit
The U.S. Federal Reserve Bank announced yesterday that it would pump an additional $1 trillion into the struggling United States economy in a surprise aggressive move to combat the recession.
The Fed said it would buy up to $300 billion in longer-term U.S. Treasury Bonds in order to reduce borrowing costs and help the U.S. housing market. U.S. Treasury Bond prices surged after the Federal Reserve's announcement yesterday, with yields experiencing their biggest one-day drop since 1987.
The Federal Reserve's decision surprised many and jolted security markets as it was the first time that the Federal Reserve has used this tactic since the early 1960's. It's an attempt by the Federal Reserve to keep interest rates low and help get some stability back into the housing market.
The Federal Reserve indicated that it would also expand an existing program that involves buying debt and securities issued by mortgage finance agencies by $850 billion to $1.45 trillion. This is a further attempt to lower interest rates in order to support the housing market.
Interest rates on conventional 30-year mortgage loans dropped by .375 today.
