This little tidbit from the Fed almost slipped through without notice yesterday.
The Federal Reserve purchases fixed-rate, non-callable, senior benchmark securities issued by Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. Prior to August 31, 2009, purchases were focused on off-the-run securities in that category. Going forward, purchases will include on-the-run securities in that category. This change represents a technical adjustment designed to mitigate market dislocations and to promote overall market functioning. Over the course of the program, the Federal Reserve may change the scope of purchasable securities.
It was only a month ago that the Fed was monetizing treasury notes via the back door. It seems that back door monetization is no longer fast enough to keep interest rates from rising. The Fed is now doing it in your face.
If there was any question of semantics remaining about Fed monetization, then please see this video, where William Dudly of the NY Fed admits it.
If you want a primer of how this works and why it is happening, please click on this link.