Federal Reserve Bank of Dallas President Richard Fisher, who is to be a voting member of the policy-setting committee next year, said he argued for a US$20 billion reduction in the US Federal Reserve’s monthly bond purchasing pace instead of the US$10 billion announced last week.
“The market could have digested that,” he said in an interview with Fox Business Network on Tuesday.
The Federal Open Market Committee announced on Wednesday last week that it would dial back its monthly bond purchases to US$75 billion from US$85 billion on signs of an improved labor market.
Fisher has been among the most vocal critics of the so-called quantitative easing program that began in September last year and has been calling for an early slowdown to the purchases.
“We’re on an upward trajectory and that’s what’s important,” he said of the economy.
While stock markets around the world have been fueled by central bank stimulus, Fisher said: “I wouldn’t call it a bubble.”
With the Fed taking its first step last week to unwind its unprecedented stimulus, Robeco Groep NV, Fidelity Investments and Amundi Asset Management are venturing into developed nations hit hardest by the eurozone debt crisis.
Bonds from Spain to Italy and Ireland posted the world’s biggest gains and the euro rose against the most-traded currencies.
“Europe may not be perfect and there are still a lot of issues, but we don’t expect the euro crisis to flare up again,” Kommer van Trigt, the head of fixed-income at Rotterdam-based Robeco Group, which oversees about US$260 billion, said in an interview on Thursday last week.
“We expect the European Central Bank to remain in the easing mode while the Fed starts tapering. Against this backdrop, we are more constructive on European bonds relative to US Treasuries,” he added.
However, South Korea’s government bonds fell yesterday, pushing the three-year yield to a one-week high, on concern the US Fed will continue to reduce its stimulus through next year as the US economy improves.
“The latest US data, including consumer spending figures, fueled concerns the Fed’s tapering will stay on track,” Kim Jin-woo, a fixed-income analyst at Shinhan Investment Corp in Seoul, wrote in a research note yesterday. “Investor sentiment is not aggressive at the year-end, which may limit big moves.”
The yield on the 3 percent government bonds due in December 2016 rose two basis points, or 0.02 percentage points, to 2.90 percent in Seoul, the highest level since Monday last week, according to Korea Exchange Inc prices.
In related news, China’s benchmark money-market rate tumbled the most since February 2011 after the nation’s central bank injected funds via open-market operations for the first time in three weeks, helping alleviate a cash crunch.
The seven-day repurchase rate, a gauge of funding availability in the banking system, tumbled 344 basis points, or 3.44 percentage points, to 5.4 percent, according to a daily fixing from the National Interbank Funding Center. It more than doubled to 8.84 percent in the last five days.
The People’s Bank of China (PBOC) auctioned 29 billion yuan (US$4.8 billion) of seven-day reverse-repurchase agreements at a yield of 4.1 percent yesterday, after 300 billion yuan of targeted cash injections last week failed to hold borrowing costs down.