Yes, Fed Heads, Liquidity-Pumping Does Drive Risk Asset Prices Higher

Regarding point 3 above, amid the climate of falling interest rates and credit spreads, the hunt for yield has spurred activity in the “carry trade” (Note 2), ie investing short-term money in long-term bonds in order to make money on long-short interest rate differentials (incl non-liquidity premium/term spread). The Bank for International Settlements (BIS) has highlighted the role of leveraged funds in that regard (comments in Figure 2).