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Federal Reserve plan stuns investors

The Federal Reserve on Wednesday stunned investors by announcing plans to buy $300bn of US government debt, triggering a plunge in bond yields and the dollar.

In a further display of aggression, the US central bank also said it was more than doubling its purchases of securities issued by housing giants Fannie Mae and Freddie Mac to $1,450bn. It said it now expected to keep interest rates near zero for an “extended period” of time.

The yield on 10-year US Treasuries plummeted 50 basis points to 2.50 per cent, while private borrowing rates fell by roughly half as much. Equities bounced with big gains in troubled banks such as Citigroup and Bank of America. But the dollar fell 3.2 per cent against the euro and 2.3 per cent against the yen.

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This article was originally posted on FT.com

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