Tags: roach | fed | long | bonds

Roach: Fed Bond Move Not A Good Sign

By Greg Brown   |   Thursday, 19 Mar 2009 09:55 AM

Stephen Roach, chairman for Asia at Morgan Stanley, tells CNBC that the Fed's decision to buy long U.S. bonds is not good news.

"They did it because things are weaker, not stronger," Roach said. "This is not a sign of incipient recovery in the U.S. or global economy. I think it's just another example of a Federal Reserve that is utterly beside itself with concern over mounting downside risks in the U.S."

"I would not view this as a constructive sign for prospects going forward," Roach said.

The U.S. central bank said Wednesday it will put than $1.2 trillion into the economy and of that spend up to $300 billion on long-term government bonds and $750 billion buying up mortgage-backed securities.

Mortgages rates are already falling in response. The Fed's move is an attempt to force the economy to restart by making huge amounts of cheap money available by literally printing more, very quickly, despite the inflation risks later.

The Fed has not tried influence long rates by buying long-term bonds since the 1960s.

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Stephen Roach, chairman for Asia at Morgan Stanley, tells CNBC that the Fed's decision to buy long U.S. bonds is not good news."They did it because things are weaker, not stronger," Roach said. "This is not a sign of incipient recovery in the U.S. or global economy. I think...
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