Tags: Fink | QE | bond | bubble

BlackRock's Fink: Fed May Be Blowing a Bond Bubble

By Dan Weil   |   Wednesday, 18 Sep 2013 06:03 PM

The Federal Reserve's decision Wednesday not to cut back its quantitative easing (QE) ultimately risks creating a bubble in the bond market, says BlackRock CEO Larry Fink.

The Fed will keep buying $85 billion of Treasurys and mortgage-backed securities a month.

The longer QE lasts, the tougher it will be to exit, Fink told CNBC.

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"What I'm worried about now is the Fed is going to be buying maybe more than 100 percent, maybe 110, 120 percent of all debt issuance. I think that's going to create more of a bubble issue in the future, and it's going to make it more difficult to unravel this."

In other reactions to the Fed's policy announcement, Ken Fisher, CEO of Fisher Investments, is upset that the Fed decided not to taper. "Quantitative easing is an evil," he told CNBC.

"I'm appalled. The market is rising, so I'm happy, but I'd much rather see the wicked witch of the East go away."

Brian Jacobsen, chief portfolio strategist for Wells Fargo Advantage Funds, told CNBC that as a result of the Fed dashing expectations of a tapering, QE "might not actually be stimulative anymore."

The recent rise of long-term interest rates convinced the Fed to stand pat, some experts say.

“Clearly the Fed has been spooked by the extent of the surge in long-term interest rates over the past couple of months and the impact that now appears to be having on the housing market,” Paul Ashworth, chief U.S. economist at Capital Economics, told MarketWatch.

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