Dealers note a rumor sweeping the market that the Fed is in buying Treasuries for the first time as part of its credit ease policy. 10-year notes have fallen about 10 bp in yield this afternoon after a so-so auction of 10 year notes. We hear there was a buyer of 2 bln 10 year notes this afternoon, supposedly a mortgage servicer. The Fed, to its credit, has been extremely transparent in its actions, essentially announcing what they intend to do in the market before acting.
The dollar is presumably falling on unease of quantitative easing but the market may be getting faked out. Another failure above the 1.2800 level could see a downside washout along the lines of yesterday’s slide. EUR/USD is at 1.2805.
