Forbes.com — By Alister Bull
WASHINGTON, May 28 (Reuters) – Rising U.S. government bond yields could force the Federal Reserve to expand a massive program to buy Treasury and mortgage-related debt, and if it does, it may need to be much more aggressive to be effective.
The Fed’s second-in-command Donald Kohn gave a clear signal in a speech on Saturday that he viewed the economic impact of the asset purchase program favorably, and Fed documents show officials debated ramping up the program in April.
Since then, concerns over how the United States will fund a towering budget deficit have led to a bond market bloodbath.
The U.S. Treasury is expected to borrow about $2 trillion this year as it seeks to cover a fiscal 2009 deficit of around $1.8 trillion.
for more go to source: FED FOCUS-Rise in US Treasury yields may trigger more Fed buying – Forbes.com.