Posted by The WSJ’s incomparable Hilsenrath reports that the weak August Jobs report makes further monetary easing at the Fed’s September meeting more likely.
According to Jon, the conversation at the Fed has now turned to how to ease – with an open ended programme now finding favour.
Officials have been leaning toward an open-ended bond-buying program in which the Fed holds open the possibility that it will continue to buy bonds after an initial allotment is purchased if the economy doesn’t pick up. They also have been leaning toward purchasing mortgage backed securities.
I wonder if the open ended-ness of the policy means that bonds won’t sell off following the announcement this time? Or does the expectations mechanism (inflation expectations rise as the Fed will keep at it) dominate?
I haven’t yet decided…
ricardian ambivalence 
As long as it’s credible, bonds must sell off.
Don’t they sell off after announcement anyway (fed gets front run)?
One interesting thing is how they will play MBS. MBS are priced on WAL.
Or at least they get priced on WAL in AUD market. Maybe diff for US RMBS
In the short term the markets will do what they do.
The reality is QE adds almost nothing to the economy. If Bernanke wanted to make a difference he would set QE based on price rather than quantity (ie: The fed targeting say a 1.0% 10 year bond rate) – which is exactly what they do at the short end.
In any event, if yields spike (prices fall) from any volume related QE announcement, it will be short lived. US household debt still way to big to sustain increases in interest rates.