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I also think you are right about the yield curve steepening eventually. However, I am a bit fuzzy on how the Fed thinks it can ever allow rates to rise on long bonds without also affecting shorter rates.


Notehound,

most of the time the FED only uses the fed funds rate to control rates. This controls the short end of the curve. The long end of the curve is much more of a private sector function.

Only in recent years has the FED messed with the long bond...so much.

Dave
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