Today's strong demand for new 3-year notes reflects rising expectations the FOMC will launch new stimulus Thursday. Firing up investors' interest is the prospect of the policymakers extending their guidance out to 2015--which would reassure market players such as banks to buy 2- and 3-yr paper. Another boost? If QE3 is launched, the central bank likely stops the selling operation on short-dated notes from Operation Twist.
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