September 17th, 2008

Fed Needs Cash, Sells Debt



Bailouts have left the Fed seeking for more cash. The Treasury Department will begin a program today that will sell more debt in order to expand the Fed’s balance sheet. They will begin with a $40 billion auction of 35-day bills, and then will continue with a series of treasury bill auctions. Offers of billion of dollars in backing have left the government a little short on cash. Despite being a natural course of action, this could become a cause for concern of interest rates.

As new treasuries begin to flood the market, we wonder what happens if buyers don’t begin to line up. It all comes back to supply and demand; in order to attract investors, yields will have to increase. Unfortunately, mortgage rates are based on those yields, and therefore are likely to rise.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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