“Fed Meeting, Tax Deal Key to Coming Week,” by Shanthi Bharatwaj, TheStreet.
Gary Flam, portfolio manager at Bel Air Investment Advisors, says that the backup in yields in recent days may not be a good indicator of the success or failure of QE2, noting that yields climbed shortly after the first round of quantitative easing as well. In March 2009 the 10-year yield was 2.6% to 2.7%, but between then and June, the yield rose to 3.8%, he pointed out.
Flam went on to argue that the move towards risky assets was partly what the Fed wanted as it would stimulate investment and business activity.
“The Fed’s goal is to support economic activity. The Fed is getting its stated goal,” he said.
What’s more, he added, investors were moving out of safe havens like fixed income and gold and into riskier assets because they were confident about the economy, not because the interest rates on bonds were low. That trend is more sustainable for the economy in the long term.
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