The government released specifics today on their plan to purchase long-term treasuries. The $300 billion plan is a drop in the bucket in terms of the scope and size of the treasury market, but Bernanke appears quite confident in his ability to manipulate this market. Unfortunately for Mr. Bernanke and Mr. Geithner their spending strategy is likely to have the exact opposite impact down the road. Our government is going to have to finance this spending spree somehow and the mountain of treasury debt that is in the pipeline will only stimy the grand plan to manipulate the bond market.
Julian Robertson’s rate cap trade looks more and more attractive every day: