Fed plays chicken with bond market

It appears that Ben Bernanke and the boys at the Federal Reserve have decided to play a game of chicken with the bond market as their policy meeting came and went today with no change to the already announced plans to purchase U.S. Treasuries and other securities by the truckload.

Some analysts thought they'd add a second truck for this task, but it was not to be.

Recall that the short-term interest rate pedal has been nailed to the floorboard for months now so, if the Fed wants to influence financial markets it must now do so by announcing more money printing which, apparently, they don't feel the need to do at this time.

Following the release of the policy statement, prices for the benchmark ten-year Treasury plunged, pushing the yield up to a six-month high of 3.1 percent which, given the potential for soaring inflation during most of those ten years still sounds like way too low a return.

The last two Fed statements are shown below, all the changes in the text highlighted in red amounting to basically "no change" at all.