Bank of America (NYSE:BAC) and JPMorgan (NYSE:JPM) responded in notes to the ongoing nod of the Federal Reserve that it's going to begin quantitative easing again.
Brian Sack, Federal Reserve Bank of New York Executive Vice President, recently said at the 2010 CFA Institute Fixed Income Management Conference, that "In terms of the benefits, balance-sheet expansion appears to push financial conditions in the right direction ... in that it puts downward pressure on longer-term real interest rates and makes broader financial conditions more accommodative."
Sack was referring to the Fed acquiring mortgage-backed securities as part of quantitative easing and their stimulus strategy.
Bank of America and JPMorgan are assuming the comments by Sack, and the Federal Reserve itself, are indicative that quantitative easing will begin soon, probably in November.
They said it'll have a strong impact on the secondary markets.
Sack admitted one of the many risks involved with quantitative easing is it is reasonable to assume that the effects of balance sheet expansion would diminish at some point, especially if yields were to move to extremely low levels."
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