18 March 2009: The Fed fires its bazooka
The Federal Reserve announced it would buy up to $300 billion of long-term Treasuries and an additional $750 billion in mortgage securities, expanding its quantitative easing program to over a trillion dollars. Bond yields plunged, and stocks, which had just bottomed, kept climbing. Quantitative easing went from an experiment to a standard tool, and it reshaped asset prices for over a decade.
The lesson: Central bank buying can move asset prices dramatically, which is why investors watch it so closely.
What it meant for investors
$1,000 in US Treasury bonds at the start of 2010 → $1,300 today, vs $6,071 in the S&P 500.
We start the clock at the start of 2010, the first year in our price data after the event. That is 1.3 times the money, but $4,771 less than a plain index fund made over the same years.
What US Treasury bonds teaches: Bonds bought at very low yields carry real price risk, because the starting yield is the best guide to future bond returns.
| Bought in | Price then | Worth today | S&P 500 would be |
|---|---|---|---|
| 2010 | $400 | $1,300 | $6,071 |
| 2012 | $460 | $1,130 | $5,312 |
| 2015 | $480 | $1,083 | $3,301 |
green = beat the S&P 500 · red = lost money
What if you bought US Treasury bonds? Every starting year and the full story →
More US Treasury bonds history
- 4 February 1994: The Fed starts the great bond massacre
- 15 June 2022: The Fed hikes 75 basis points
- 5 August 2011: S&P strips the US of its AAA rating
- 27 August 2020: The Fed changes how it targets inflation
- 6 October 1979: Volcker's Saturday Night Special
- 3 November 2010: The Fed launches QE2
Could you have called it at the time? The wheel picks the year, you pick the position, ten seconds a pick.
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