Fed buys bonds as FTSE hits a nine-month high

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FEDERAL Reserve chairman Ben Bernanke last night unveiled the successor to his “Operation Twist” bond-buying scheme as the United States moves to try and shore-up its faltering economy.

The Federal Open Market Committee will keep buying $45 billion (£28bn)-worth of United States treasury bonds each month, along with $40bn-worth of mortgage-backed securities.

The Fed said: “Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.”

Markets around the globe edged higher yesterday ahead of the Fed’s decision. In London, the FTSE 100 index – which closed before the announcement was made – ended the day up 20.88 points at 5,945.85, a nine-month high.

Jeremy Batstone-Carr, chief economist at Charles Stanley, said: “There’s only one game in town and that’s the Federal Reserve. Frankly everything else pales into distant insignificance.”

Markets were also boosted by Germany indicating it will back plans to give the European Central Bank powers to supervise banks across the eurozone. Greece’s foreign lenders also hailed a bond buyback as a success even though it narrowly fell short of a target to cut the country’s debt, paving the way for Athens to get long-delayed aid.