One of the most powerful and dominant pursuits is back. It’s one that compels fanaticism and stirs up fantasies. No, it isn’t the NFL preseason. It is the Federal Reserve effort to lower borrowing costs.
This week, the Fed will be in the bond market buying U.S. government debt. The Fed is playing defense against a slowing economy by hoping to keep interest rates low.
The bond market seems poised to revisit interest rates last seen in late 2008 when the financial system teetered on the edge of collapse. Investors may see those record low rates as soon as this week. The Fed starts buying government bonds Tuesday in what is the first play of an $18 billion game plan to lower interest rates and stimulate the economy.
As rates fall, consumers may see their borrowing costs drop. Certainly, creditworthy home buyers may be tempted by ever-cheaper mortgage money. Perusing the open-house listings may compete with fantasy football drafts.
Still, lower borrowing costs haven’t inspired businesses to start hiring.
The Fed hopes a different strategy from its monetary playbook will.
The bond market may not inspire tailgating and face painting, but it can trigger the same kind of awe as a perfectly executed double-reverse. President Bill Clinton’s former campaign manager James Carville once said that if he were reincarnated, he wanted to come back as the bond market. “You intimidate everybody,” he remarked.
