The Fed is trapped, and I don't see any way out.
The bond market sells off going into an auction, and the catalyst is growth. Every sign of growth makes bond holders less interested in long-term debt securities.
After each auction, the market bounces, getting ready for the next sell-off.
* * * * * J B K * * * * *
San Francisco
The cost of living in the U.S. rose in March, while prices excluding food and energy were unexpectedly unchanged, indicating tame inflation is accompanying the economic recovery.
The 0.1 percent gain in the consumer price index was in line with expectations and followed no change in February, the Labor Department reported today in Washington. Excluding food and fuel, the so-called core rate held steady after rising 0.1 percent in February, reflecting cheaper rents and clothing.
Retailers like Wal-Mart Stores Inc. and Home Depot Inc. are offering discounts to attract consumers coping with a 9.7 percent rate of unemployment and rising foreclosures. An absence of price pressures is one reason why Federal Reserve policy makers last month pledged to keep the benchmark interest rate near zero in coming months to fuel the economy.
"Inflation as a concern is relegated to the distant future," said Guy Lebas, chief fixed income strategist at Janney Montgomery Scott LLC in Philadelphia. "It gives the Fed the flexibility to keep rates low for a while."
http://www.bloomberg.com/apps/news?pid=20601087&sid=a_txgpdQqthM&pos=2
