The minutes from the Fed’s rate setting committee are out. The Journal says they show officials were “slightly more confident that the recovery was firming and plotted out an exit strategy that may include sales of the Fed’s mortgage holdings.” As per usual, bond watchers are reading the tea leaves closely, and finding some interesting tidbits. Here’s a smattering of opinions we’ve received via email.
Michael Shaoul, chief executive, Oscar Gruss: “We note that the idea of paying interest on Excess Reserve Balances has now been anointed with an acronym - IOER. This is a telling indication that it is about to be adopted as a formal policy tool, even more so than Bernanke’s remarks to Congress that we commented on last week. There was (of course) no discussion about the possible complication of the FRB paying billions of USD to the Commercial Banks. There is also no agreement on the desirability of shrinking reserves in advance of paying interest, or (more importantly) the fact that there is no simple policy which would allow this to occur.”
Guy LeBas, Janney Montgomery Scott: “There was a distinctly hawkish tone to the minutes, but in truth, they didn’t contain much new, as recent Fedspeak from Hoenig and Plosser almost previewed what was released today over the course of the last week. I find it amusing that Hoenig, who dissented, preferring to drop the “extended period” language only wanted to downgrade it to “for some time,” which seems like a pretty fine distinction to result in a dissent.”>>>MORE