INSTANT VIEW: U.S. Fed says to buy long-dated Treasuries

NEW YORK (Reuters) - The U.S. Federal Reserve on Wednesday, in a surprise move, said it will buy up to $300 billion worth of longer-term U.S. government debt over the next six months and expand purchases of mortgage-related debt to help ease credit market conditions.

KEY POINTS: * In a statement at the end of a two-day meeting, the central bank's policy panel also said it had decided to hold its target for overnight interest rates in a zero to 0.25 percent range -- the level reached in December -- and repeated that borrowing costs would likely stay unusually low for some time. * "In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability," the Fed said.

COMMENTS:

JAMES STEEL, CHIEF COMMODITIES ANALYST, HSBC, NEW YORK

"Gold has moved positively on the Fed statement as this drop in the dollar has fueled gold's comeback."

"I don't know if the market was entirely expecting this to occur. Gold has been very sensitive to the financial sector, so this is potentially an important development."

RUDY NARVAS, SENIOR ANALYST, 4CAST LTD, NEW YORK:

"It is quite surprising to us that they were ready to call in the Treasury buy program. We thought the were still going to wait to see how the TALF plays out. So it looks like they are trying to pull out all the stops by buying not only more MBS but also more GSE debt -- they are trying to steamroll accommodation right through to the economy. It does reflect how dire they think the situation is, when you look at the statement they talk about increasing economic slack and they weren't talking about increasing economic slack before."

RICK MECKLER, PRESIDENT, LIBERTYVIEW CAPITAL MANAGEMENT, NEW YORK:

"It's an attempt to keep rates low, particularly on the mortgage side, which is seen as critical to a big revival of the housing market. I think it fits in well with the overall plan the government has to be more creative about how it can bring mortgages more in lines with the movement that's appeared in Treasury rates...

"At the core of this problem remains the housing market, the liabilities the banks have with mortgages and the ability to stabilized prices. Like a lot of people I'm open to creative ideas to help stabilize that market.

"The stock market (reaction) is not surprising... The bond market is little bit more technical in some ways. The initial reaction to someone taking supply out of the market is that it will create higher prices. But I won't be surprised to see the bond market take a longer-term view at some point and see this as a temporary. I'm not sure the reaction will continue to be as strong as it has been."

TIM GHRISKEY, CHIEF INVESTMENT OFFICER, SOLARIS ASSET MANAGEMENT, BEDFORD HILLS, NEW YORK:

"After Fed announcements it's always volatile, so we'll see if this holds up. The purchase of Treasuries certainly was something in the statement that helped. Leaving the rate or the range unchanged isn't a surprise to anybody. The purchases of agencies and Treasuries, while it has been talked about a long time, it certainly gives the market, especially the Treasury market a lift here and therefore gives the stock market and the economy a lift. Obviously they talked about how the economy continues to contract, that the near-term outlook is weak. None of this should be a surprise, but if we see the stock market stabilize here and continue to gradually move higher, that should be a benefit for consumer confidence and the economy."

ROBERT BLAKE, SENIOR CURRENCY STRATEGIST, STATE STREET GLOBAL MARKETS, BOSTON:

"The (FOMC) statement reverses course from what Bernanke had suggested in January and provides some quantitative targets for purchase of different securities, mortgage-backed, agency, and they also add Treasury securities to the list of securities they're going to be buying. So the markets are reacting to that, with the dollar dropping pretty sharply on the news.

"I think the move is going to be a one-off move. I don't know that we're going to see sustained declines in the dollar, which would require a persistent improvement in risk appetite and I'm not sure we're there yet."

DAN FUSS, VICE CHAIRMAN, LOOMIS SAYLES, BOSTON:

"I'm not surprised by the Federal Reserve's moves. They have been telegraphing that they will buy Treasuries for a long time. And they hinted that they would do so depending on the level of yields -- and yields were rising before this. This will affect mortgage rates and everything else tied to the Treasury market, which means rates will go lower. This is good news for Treasuries, agencies and nearly all other bonds. This is positive short-term but bad longer-term: As the Fed increases its balance sheet, where are they going to get the money? The yen is strengthening against the dollar and that is bad news for Japan."

JOSEPH ARSENIO, MANAGING DIRECTOR, ARSENIO CAPITAL MANAGEMENT, LARKSPUR, CALIFORNIA:

"The Fed is proactively devaluing the dollar, attempting to finance Obama's socialist agenda. Less money is flowing into the U.S. from abroad.

"It's overtly inflationary and will inflate most assets, including crude and paper assets like stocks and bonds, etc."

BRUCE MCCAIN, CHIEF INVESTMENT STRATEGIST, KEY PRIVATE BANK, CLEVELAND, OHIO:

"That's a huge rally in Treasuries. It seems that was a surprise to the market."

"I thought they would concentrate more on the TALF program and see how that worked."

"Given the huge funding needs of the federal government I don't think the $300 billion purchase of Treasuries over six months is a huge market mover over that period of time."

"This may suggest a little bit more of a dire outlook for the economy, which wouldn't be as good for corporate bonds as it is for Treasuries."

CARL LANTZ, U.S. INTEREST RATE STRATEGIST, CREDIT SUISSE, NEW YORK:

"It is positive for basically every asset class except the dollar which will probably suffer on the back of the theme of printing money."

GREG SALVAGGIO, VICE PRESIDENT FOR TRADING, TEMPUS CONSULTING, WASHINGTON:

"Bottom line is the Fed is adding a trillion dollars to their balance sheet and that's a lot of taxpayer money. Interest rates now are effectively negative across the board. The dollar is selling off because this may contribute to long-term weakness in the currency and investors are very wary of that scenario."

JAMES CARON, HEAD OF GLOBAL RATES RESEARCH, MORGAN STANLEY, NEW YORK:

"This is a pretty dramatic move. We think they are buying maturities over seven years. They are trying to bring down all consumer rates."

MARKET REACTION: STOCKS: U.S. stock indexes rise more than 1 percent. BONDS: U.S. Treasury debt prices add to gains . DOLLAR: U.S. dollar falls sharply .

EARLIER DATA FROM MARCH 18:

U.S. consumer prices rise

U.S. current account narrows