Tuesday, September 11, 2012

Roundup: Big Banks on QE3 (GS; MS; JPM)

From MarketBeat:
Some of the biggest brains in the financial world seem increasingly sure that the Federal Reserve is about to embark on a third program of creating money and using it to buy bonds such as Treasurys or mortgage-backed securities. But not all of them Morgan Stanley's MS -2.75% Vincent Reinhart, former head of the Fed’s monetary affairs group, for instance doesn’t expect the Fed inflate its balance-sheet further this week. Here are some thoughts from some of the biggest bond-trading banks on Wall Street on what we could hear from the Fed on Thursday.
  • Goldman Sachs: “We now anticipate that the FOMC will announce a return to unsterilized asset purchases (QE3), mainly agency mortgage-backed securities but potentially including Treasury securities, at its September 12-13 FOMC meeting. We previously forecasted QE3 in December or early 2013. We continue to expect a lengthening of the FOMC’s forward guidance for the first hike in the funds rate from “late 2014” to mid-2015 or beyond … While there is significant uncertainty around the details of any new program, our base case is that QE3 will be formulated as an open-ended asset purchase program of around $50 billion per month, with an end date that is not given in advance but made dependent on progress in the economic recovery.”...MORE