EXCERPTS:
"The Treasury market welcomed the Federal Reserve's plan to shower it with more cash, instantly driving 10-year yields to new 16-month lows. But the response was muted as investors realized that, with rates already so low, the Fed's plan to buy U.S. government debt may have relatively little impact. The key determinant of interest rates for now is likely to be the health, or lack thereof, of the U.S. economy.
The 10-year Treasury note's price jumped nearly a full point in the moments after the Federal Reserve announced its plan to reinvest money that rolls out of its mortgage portfolio into longer-dated Treasury debt. The yield, which moves in the opposite direction of price, fell to 2.779%, the lowest since April 2009, from 2.818% just before the Fed's announcement.
That is good news for many in the economy—the 10-year Treasury yield is a benchmark that affects other rates, including mortgage rates, which also are at historic lows—but investors are beginning to wonder just how much more juice the Fed has to drive rates any lower.
The 10-year yield already has tumbled from about 4% in April as investors flocked to U.S. government debt amid worries about Europe and the durability of the U.S. economic recovery.
