To lower interest rates, the Fed employed two tactics.
One was to cut the so-called Fed Funds rate - what the Fed charges the nation's biggest banks to borrow money on a short-term basis - to nearly zero, and keep it there for seven years.
Mr. Bernanke had a clever plan, what he called "Quantitative easing": The Fed would buy trillions of dollars of toxic securities that had marred the balance sheets of the Wall Street banks.
By creating artificial demand for these securities, where there had been virtually none, the Fed helped big banks cleanse their balance sheets, reassuring investors and creditors.
Like anything else, bond prices are subject to the vagaries of supply and demand; the Fed's gorging drove up not only the price of these particular bonds but also bond prices generally, lowering their yields.
The Fed's balance sheet expanded to about $4.5 trillion, from less than $900 billion before the crisis, thanks to the purchase of squirrelly assets from Wall Street.
The Fed's artificial demand has kept bond prices higher than they otherwise would have been, and their yields lower.
https://www.nytimes.com/2018/08/09/opinion/corporate-debt-bubble-next-recession.html
One was to cut the so-called Fed Funds rate - what the Fed charges the nation's biggest banks to borrow money on a short-term basis - to nearly zero, and keep it there for seven years.
Mr. Bernanke had a clever plan, what he called "Quantitative easing": The Fed would buy trillions of dollars of toxic securities that had marred the balance sheets of the Wall Street banks.
By creating artificial demand for these securities, where there had been virtually none, the Fed helped big banks cleanse their balance sheets, reassuring investors and creditors.
Like anything else, bond prices are subject to the vagaries of supply and demand; the Fed's gorging drove up not only the price of these particular bonds but also bond prices generally, lowering their yields.
The Fed's balance sheet expanded to about $4.5 trillion, from less than $900 billion before the crisis, thanks to the purchase of squirrelly assets from Wall Street.
The Fed's artificial demand has kept bond prices higher than they otherwise would have been, and their yields lower.
https://www.nytimes.com/2018/08/09/opinion/corporate-debt-bubble-next-recession.html
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